10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________________________________________________________

FORM 10-Q

 ______________________________________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________                    

Commission File Number: 1-32225

  _____________________________________________________________________________________

HOLLY ENERGY PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 ______________________________________________________________________________________

Delaware	20-0833098
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2828 N. Harwood, Suite 1300
Dallas
Texas	75201
(Address of principal executive offices)	(Zip code)

(214) 871-3555

(Registrant’s telephone number, including area code)

________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Limited Partner Units	HEP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No  ☒

The number of the registrant’s outstanding common units at May 1, 2023, was 126,440,201.

Table of 19,

HOLLY ENERGY PARTNERS, L.P.

INDEX

	FORWARD-LOOKING STATEMENTS		3
PART I. FINANCIAL INFORMATION			5
	Item 1.	Financial Statements (Unaudited)	5
		Consolidated Balance Sheets	5
		Consolidated Statements of Income	6
		Consolidated Statements of Cash Flows	7
		Consolidated Statements of Equity	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
	Item 4.	Controls and Procedures	48
PART II. OTHER INFORMATION			50
	Item 1.	Legal Proceedings	50
	Item 1A.	Risk Factors	50
	Item 6.	Exhibits	51
		Index to Exhibits	52
		SIGNATURES	52

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Table of 19,

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, statements regarding funding of capital expenditures and distributions, distributable cash flow coverage and leverage targets, and statements under “Results of Operations” and “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I are forward-looking statements. Forward-looking statements use words such as “anticipate,” “project,” “expect,” “will,” “plan,” “goal,” “forecast,” “intend,” “strategy,” “should,” “would,” “could,” “believe,” “may,” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give assurance that our expectations will prove to be correct. All statements concerning our expectations for future results of operations are based on forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:

•the negotiation and execution, and the terms and conditions, of a definitive agreement relating to the non-binding proposal we received from HF Sinclair to acquire all of the outstanding common units of HEP not beneficially owned by HF Sinclair or its affiliates in exchange for shares of common stock, par value $0.01 per share of HF Sinclair (the “Proposed HF Sinclair Transaction”) and the ability of HF Sinclair or HEP to enter into or consummate such agreement;

•the risk that the Proposed HF Sinclair Transaction does not occur;

•negative effects from the pendency of the Proposed HF Sinclair Transaction;

•failure to obtain the required approvals for the Proposed HF Sinclair Transaction;

•the time required to consummate the Proposed HF Sinclair Transaction;

•the focus of management time and attention on the Proposed HF Sinclair Transaction and other disruptions arising from the Proposed HF Sinclair Transaction;

•the demand for and supply of crude oil and refined products, including uncertainty regarding the effects of the continuing COVID-19 pandemic on future demand and increasing societal expectations that companies address climate change;

•risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals and refinery processing units;

•the economic viability of HF Sinclair Corporation (“HF Sinclair”), our other customers and our joint ventures’ other customers, including any refusal or inability of our or our joint ventures’ customers or counterparties to perform their obligations under their contracts;

•the demand for refined petroleum products in the markets we serve;

•our ability to purchase operations and integrate the operations we have acquired or may acquire, including the acquired Sinclair Transportation Company LLC business;

•our ability to complete previously announced or contemplated acquisitions;

•the availability and cost of additional debt and equity financing;

•the possibility of temporary or permanent reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units, due to reductions in demand, accidents, unexpected leaks or spills, unscheduled shutdowns, infection in the workforce, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, terminal facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party providers or lower gross margins due to the economic impact of the COVID-19 pandemic, inflation and labor costs, and any potential asset

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Table of 19,

impairments resulting from, or the failure to have adequate insurance coverage for or receive insurance recoveries from, such actions;

•the effects of current and future government regulations and policies, including the effects of current and future restrictions on various commercial and economic activities in response to the COVID-19 pandemic and increases in interest rates;

•delay by government authorities in issuing permits necessary for our business or our capital projects;

•our and our joint venture partners’ ability to complete and maintain operational efficiency in carrying out routine operations and capital construction projects;

•the possibility of terrorist or cyberattacks and the consequences of any such attacks;

•uncertainty regarding the effects and duration of global hostilities, including the Russia-Ukraine war, and any associated military campaigns which may disrupt crude oil supplies and markets for refined products and create instability in the financial markets that could restrict our ability to raise capital;

•general economic conditions, including economic slowdowns caused by a local or national recession or other adverse economic condition, such as periods of increased or prolonged inflation;

•the impact of recent or proposed changes in the tax laws and regulations that affect master limited partnerships; and

•other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission (the “SEC”) filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including, without limitation, the forward-looking statements that are referred to above. You should not put any undue reliance on any forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, and in this Quarterly Report on Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Table of 19,

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

	March 31, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $990 and $2,147, respectively)	$	7,105	$	10,917
Accounts receivable:
Trade	15,435		16,344
Affiliates	71,295		63,459
	86,730		79,803
Prepaid and other current assets	11,934		12,397
Total current assets	105,769		103,117
Properties and equipment, net	1,385,960		1,388,888
Operating lease right-of-use assets, net	2,078		2,317
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	524,564		539,705
Intangible assets, net	56,211		59,300
Goodwill	342,762		342,762
Equity method investments (Cushing Connect VIEs: $34,135 and $34,746 , respectively)	274,142		270,604
Deferred turnaround costs	23,363		24,154
Other assets	18,251		16,655
Total assets	$	2,733,100	$	2,747,502
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade (Cushing Connect VIEs: $323 and $431, respectively)	$	18,156	$	26,753
Affiliates	9,948		15,756
	28,104		42,509
Accrued interest	17,567		17,992
Deferred revenue	15,316		12,087
Accrued property taxes	7,101		5,449
Current operating lease liabilities	886		968
Current finance lease liabilities	4,608		4,389
Other current liabilities	3,048		2,430
Total current liabilities	76,630		85,824
Long-term debt	1,540,385		1,556,334
Noncurrent operating lease liabilities	1,563		1,720
Noncurrent finance lease liabilities	61,645		62,513
Other long-term liabilities	29,733		29,111
Deferred revenue	21,963		24,613
Class B unit	61,531		60,507
Equity:
Partners’ equity:
Common unitholders (126,440,201 units issued and outstanding     at both March 31, 2023 and December 31, 2022)	870,694		857,126
Noncontrolling interests	68,956		69,754
Total equity	939,650		926,880
Total liabilities and equity	$	2,733,100	$	2,747,502

See accompanying notes.

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Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit data)

	Three Months Ended March 31,
	2023		2022
Revenues:
Affiliates	$	116,878	$	92,254
Third parties	26,416		27,944
	143,294		120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	52,142		42,625
Depreciation and amortization	24,663		22,187
General and administrative	4,635		4,312
	81,440		69,124
Operating income	61,854		51,074
Other income (expense):
Equity in earnings of equity method investments	3,882		3,626
Interest expense	(25,978)		(13,639)
Interest income	20,400		12,647
Gain on sale of assets and other	173		101
	(1,523)		2,735
Income before income taxes	60,331		53,809
State income tax expense	(34)		(31)
Net income	60,297		53,778
Allocation of net income attributable to noncontrolling interests	(2,775)		(4,219)
Net income attributable to the partners	57,522		49,559
Limited partners’ per unit interest in earnings—basic and diluted	$	0.45	$	0.45
Weighted average limited partners’ units outstanding	126,440		109,640

Net income and comprehensive income are the same in all periods presented.

See accompanying notes.

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Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities
Net income	$	60,297	$	53,778
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,663		22,187
Gain on sale of assets	(79)		(25)
Amortization of deferred charges	1,071		342
Equity-based compensation expense	354		620
Equity in earnings of equity method investments, net of distributions	(1,799)		(520)
(Increase) decrease in operating assets:
Accounts receivable—trade	909		(1,132)
Accounts receivable—affiliates	(7,836)		11,190
Prepaid and other current assets	518		222
Increase (decrease) in operating liabilities:
Accounts payable—trade	(5,322)		5,525
Accounts payable—affiliates	(5,809)		(994)
Accrued interest	(424)		(5,522)
Deferred revenue	579		118
Accrued property taxes	1,652		1,675
Other current liabilities	619		2,337
Turnaround expenditures	(359)		(17,523)
Other, net	780		(464)
Net cash provided by operating activities	69,814		71,814
Cash flows from investing activities
Additions to properties and equipment	(7,614)		(14,147)
Acquisition of Sinclair Transportation	—		(321,366)
Investment in Osage Pipe Line Company, LLC	(2,500)		—
Proceeds from sale of assets	92		33
Distributions in excess of equity in earnings of equity investments	760		1,704
Net cash used for investing activities	(9,262)		(333,776)
Cash flows from financing activities
Borrowings under credit agreement	42,000		360,000
Repayments of credit agreement borrowings	(58,500)		(58,500)
Distributions to HEP unitholders	(44,308)		(36,997)
Distributions to noncontrolling interests	(2,549)		(877)
Payments on finance leases	(1,012)		(881)
Units withheld for tax withholding obligations	—		(57)
Other	5		(91)
Net cash provided (used) by financing activities	(64,364)		262,597
Cash and cash equivalents
Increase (decrease) for the period	(3,812)		635
Beginning of period	10,917		14,381
End of period	$	7,105	$	15,016
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	25,506	$	18,548

See accompanying notes.

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Table of 19,

HOLLY ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

	Common Units		Noncontrolling Interests		Total Equity
Balance December 31, 2022	$	857,126	$	69,754	$	926,880
Distributions to HEP unitholders	(44,308)		—		(44,308)
Distributions to noncontrolling interests	—		(2,549)		(2,549)
Amortization of restricted and performance units	354		—		354
Class B unit accretion	(1,024)		—		(1,024)
Net income	58,546		1,751		60,297
Balance March 31, 2023	$	870,694	$	68,956	$	939,650

	Common Units		Noncontrolling Interests		Total Equity
Balance December 31, 2021	$	443,017	$	147,532	$	590,549
Issuance of common units	349,020		—		349,020
Distributions to HEP unitholders	(36,997)		—		(36,997)
Distributions to noncontrolling interests	—		(877)		(877)
Acquisition of remaining UNEV interests	16,537		(78,187)		(61,650)
Amortization of restricted and performance units	620		—		620
Class B unit accretion	(956)		—		(956)
Other	(147)		—		(147)
Net income	50,515		3,263		53,778
Balance March 31, 2022	$	821,609	$	71,731	$	893,340

See accompanying notes.

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Table of 19,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1:Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. We commenced operations on July 13, 2004, upon the completion of our initial public offering. On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HFC”) and HEP announced the establishment of HF Sinclair Corporation, a Delaware corporation (“HF Sinclair”), as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from REH Company (formerly known as The Sinclair Companies, and referred to herein as “REH Company”). On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HFC, HF Sinclair, Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), REH Company, and Hippo Holding LLC (now known as Sinclair Holding LLC), a wholly owned subsidiary of REH Company (the “Target Company”), HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of March 31, 2023, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock to REH Company, representing 27% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HFC’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022. References herein to HF Sinclair with respect to time periods prior to March 14, 2022 refer to HFC and its consolidated subsidiaries and do not include the Target Company, Sinclair Transportation or their respective consolidated subsidiaries. References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which includes the combined business operations of HFC, the Target Company, Sinclair Transportation and their respective consolidated subsidiaries.

Additionally, on the Closing Date, pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”) by and among REH Company, Sinclair Transportation and HEP, HEP acquired all of the outstanding equity interests of Sinclair Transportation from REH Company in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $329.0 million, inclusive of final working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $678.0 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). Of the 21 million HEP Units, 5.29 million units were originally held in escrow to secure REH Company’s renewable identification numbers (“RINs”) credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement. The HEP units held in escrow were released to REH Company in April 2023 upon their satisfaction of the RINs credit obligations relating thereto. The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, which together with its subsidiaries, owns integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Target Company refineries and other third party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake.

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References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation and its consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the Acquired Sinclair Businesses.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own (a) a 50% interest in Osage Pipe Line Company, LLC (“Osage”), (b) a 50% interest in Cheyenne Pipeline LLC, (c) a 50% interest in Cushing Connect Pipeline & Terminal LLC, (d) a 25.06% interest in Saddle Butte Pipeline III, LLC and (e) a 49.995% interest in Pioneer Investments Corp. Following the HEP Transaction, we now own the remaining 25% interest in UNEV Pipeline, LLC (“UNEV”) and as a result, UNEV is our wholly owned subsidiary.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 16.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the SEC. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2023.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

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Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. The lease standard (see below) allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components for operating leases under certain conditions. We have made this election for contracts with operating leases. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02. The practical expedient does not apply for sales-type leases. Therefore, we bifurcate the consideration received for those contracts between lease and service components. The service component is accounted for within the scope of ASC 606.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the three months ended March 31, 2023 and 2022, we recognized $4.8 million and $5.2 million, respectively, of these deficiency payments in revenue, of which $0.9 million of the deficiency payments recognized during the three months ended March 31, 2022, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is

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accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

Note 2:Sinclair Acquisition

HEP Transaction

On March 14, 2022, pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of Sinclair Transportation in exchange for 21 million newly issued HEP Units, representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $329.0 million, inclusive of final working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $678.0 million. On the same date and immediately following the consummation of the HEP Transaction, pursuant to the Business Combination Agreement, REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for 60,230,036 shares of common stock in HF Sinclair, representing 27% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HF Sinclair’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistic Services, L.L.C., the ultimate general partner of HEP (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”), entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, REH Company and the stockholders of REH Company (each a “Unitholder” and collectively, the “Unitholders,” and along with REH Company and each of their permitted transferees, the “REH Parties”), which became effective on the Closing Date.

Pursuant to the Unitholders Agreement, the REH Parties have the right to nominate, and have nominated, one person to the board of directors of HLS until such time that (x) the REH Parties beneficially own less than 10.5 million HEP Units or (y) the HEP Units beneficially owned by the REH Parties constitute less than 5% of all outstanding HEP Units. The Unitholders Agreement also subjects 15.75 million of the HEP Units issued to the REH Parties (the “Restricted Units”) to a “lock-up” period commencing on the Closing Date, during which the REH Parties are prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units were released from such restrictions on the date that was six months after the closing, one-third of the Restricted Units were released from such restrictions on the first anniversary of the Closing Date, and the remainder will be released from such restrictions on the date that is 15 months from the Closing Date.

Under the terms of the Contribution Agreement, HEP acquired Sinclair Transportation, which together with its subsidiaries, owned REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipelines supporting the REH Company refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Investments Corp. (49.995% non-operated interest); and UNEV (the 25% non-operated interest not already owned by HEP, resulting in UNEV becoming a wholly owned subsidiary of HEP).

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The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date, with the excess consideration recorded as goodwill. The purchase price allocation resulted in the recognition of $119.1 million in goodwill.

The following tables present the purchase consideration and final purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Working capital adjustment payment by HEP(2)	3,955
Total cash consideration	328,955
Total purchase consideration	$	677,975

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

	(In thousands)
Assets Acquired
Accounts receivable	$	3,005
Prepaid and other current assets	59
Properties and equipment	340,682
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	119,112
Equity method investments	229,891
Total assets acquired	$	696,354
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	14,984
Total liabilities assumed	$	18,379
Net assets acquired	$	677,975

The fair value of properties, plants and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

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The fair value of the equity method investments were based on a combination of valuation methods including discounted cash flows and the guideline public company method.

The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. See Note 6.

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

For the three months ended March 31, 2023, we incurred $0.5 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses in our statements of operations.

The following unaudited pro forma combined condensed financial data for the three months ended March 31, 2022 was derived from our historical financial statements giving effect to the HEP Transaction as if it had occurred on January 1, 2021. The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of Sinclair Transportation’s fair-valued properties, plants and equipment.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services.

The pro forma results of operations do not include any contract adjustments to tariffs made after closing, cost savings or other synergies that may result from the HEP Transaction. The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

		Three Months Ended March 31, 2022
	(In thousands)
Sales and other revenues		$	134,960
Net income attributable to the partners		$	50,782

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

Note 3:Cushing Connect Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connected the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service during the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets. The Cushing Connect Joint Venture has contracted with an affiliate of HEP to manage the operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal.

The Cushing Connect Joint Venture legal entities are variable interest entities (“VIEs”) as defined under GAAP. A legal entity is a VIE if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the

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characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP constructed and is operating the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal entities. Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting. HEP’s maximum exposure to loss as a result of its involvement with the Cushing Connect JV Terminal legal entity is not expected to be material due to the long-term terminalling agreements in place to support its operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.

Note 4:Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. See Note 1 for further discussion of revenue recognition.

Disaggregated revenues were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Pipelines	$	70,582	$	64,780
Terminals, tanks and loading racks	46,187		37,015
Refinery processing units	26,525		18,403
	$	143,294	$	120,198

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Lease revenues	$	87,377	$	72,914
Service revenues	55,917		47,284
	$	143,294	$	120,198

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

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	March 31, 2023		December 31, 2022
	(In thousands)
Contract assets	$	8,669	$	6,672
Contract liabilities	$	(3,274)	$	—

The contract assets and liabilities include both lease and service components. During the three months ended March 31, 2022 we recognized $0.9 million of revenue that was previously included in contract liability as of December 31, 2021. During the three months ended March 31, 2023 and 2022, we also recognized $2.1 million and $45 thousand, respectively, of revenue included in contract assets.

As of March 31, 2023, we expect to recognize $2.4 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2024 through 2037. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2023	$	295
2024	367
2025	284
2026	268
2027	236
2028	235
Thereafter	690
Total	$	2,375

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

Note 5:Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 22 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $7.8 million and $7.6 million as of March 31, 2023 and December 31, 2022, respectively, with accumulated depreciation of $4.1 million and $4.0 million as of March 31, 2023 and December 31, 2022, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

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Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	March 31, 2023		December 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$	2,078	$	2,317
Current operating lease liabilities	886		968
Noncurrent operating lease liabilities	1,563		1,720
Total operating lease liabilities	$	2,449	$	2,688
Finance leases:
Properties and equipment	$	7,823	$	7,649
Accumulated amortization	(4,107)		(3,979)
Properties and equipment, net	$	3,716	$	3,670
Current finance lease liabilities	$	4,608	$	4,389
Noncurrent finance lease liabilities	61,645		62,513
Total finance lease liabilities	$	66,253	$	66,902
Weighted average remaining lease term (in years):
Operating leases	4.6		4.6
Finance leases	13.6		13.9
Weighted average discount rate:
Operating leases	4.7%		4.6%
Finance leases	5.7%		5.7%

Supplemental cash flow and other information related to leases were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	307	$	276
Operating cash flows on finance leases	$	1,160	$	981
Financing cash flows on finance leases	$	1,012	$	881

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Maturities of lease liabilities were as follows:

	March 31, 2023
	Operating		Finance
	(In thousands)
2023	$	684	$	6,032
2024	608		7,597
2025	491		7,138
2026	326		7,258
2027	205		6,511
2028 and thereafter	318		61,038
Total lease payments	2,632		95,574
Less: Imputed interest	(183)		(29,321)
Total lease obligations	2,449		66,253
Less: Current lease liabilities	(886)		(4,608)
Noncurrent lease liabilities	$	1,563	$	61,645

The components of lease expense were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease costs	$	301	$	262
Finance lease costs
Amortization of assets	299		192
Interest on lease liabilities	954		959
Variable lease cost	212		37
Total net lease cost	$	1,766	$	1,450

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy which includes performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the three months ended March 31, 2023, we amended agreements with HF Sinclair related to certain crude tank assets. The amended agreements were treated as lease modifications of previous agreements that met the criteria of sales-type leases. The modified agreements still met the criteria of sales-type leases; therefore, the residual net investment in lease is carried over to the new sales-type lease, and no gain or loss is recognized.

During the three months ended March 31, 2022, we entered into new agreements and modified other agreements with HF Sinclair related to our acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the three months ended March 31, 2022.

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The balance sheet impacts were composed of the following:

	Three Months Ended March 31, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

These sales-type lease transactions were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease revenues	$	82,798	$	69,975
Direct financing lease interest income	537		520
Sales-type lease interest income	19,864		12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	4,579		2,939

For our sales-type leases, we bifurcate customer obligations between lease and service components. We included the lease portion of customer obligations related to minimum volume requirements in guaranteed minimum lease payments. The lease portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized the lease portion of any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2023:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2023	$	222,303	$	1,676	$	62,996
2024	270,998		2,226		82,478
2025	195,194		2,244		80,479
2026	181,204		2,262		80,479
2027	148,739		2,280		80,479
2028 and thereafter	522,446		34,940		681,221
Total lease receipt payments	$	1,540,884	$	45,628	$	1,068,132
Less: Imputed interest			(29,394)		(944,047)
			16,234		124,085
Unguaranteed residual assets at end of leases			—		390,331
Net investment in leases			$	16,234	$	514,416

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Net investments in leases recorded on our balance sheet were composed of the following:

	March 31, 2023				December 31, 2022
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	411,077	$	16,234	$	418,989	$	16,264
Unguaranteed residual assets	103,339		—		110,466		—
Net investment in leases	$	514,416	$	16,234	$	529,455	$	16,264

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Note 6:Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

The carrying amounts and estimated fair values of our senior notes were as follows:

		March 31, 2023				December 31, 2022
Financial Instrument	Fair Value Input Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	$	494,305	$	468,380	$	494,047	$	458,090
6.375% Senior Notes	Level 2	394,580		398,480		394,287		394,568
Total Liabilities		$	888,885	$	866,860	$	888,334	$	852,658

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 10 for additional information.

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Non-Recurring Fair Value Measurements

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company method, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

For the net investments in sales-type leases recognized during the three months ended March 31, 2022, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

Note 7:Properties and Equipment 

The carrying amounts of our properties and equipment were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Pipelines, terminals and tankage	$	1,584,825	$	1,567,359
Refinery assets	353,998		353,998
Land and right of way	171,368		171,327
Construction in progress	21,917		23,027
Other	69,550		69,098
	2,201,658		2,184,809
Less accumulated depreciation	(815,698)		(795,921)
	$	1,385,960	$	1,388,888

Depreciation expense was $20.2 million and $18.5 million for the three months ended March 31, 2023 and 2022, respectively, and includes depreciation of assets acquired under capital leases.

Note 8:Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek US Holdings, Inc. (“Delek”) in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets were as follows:

	Useful Life	March 31, 2023		December 31, 2022
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(148,586)		(145,497)
		$	56,211	$	59,300

Amortization expense was $3.1 million and $3.5 million for the three months ended March 31, 2023 and 2022, respectively. We estimate amortization expense to be $9.1 million for 2024 through 2027, and $9.0 million for 2028.

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We have additional transportation agreements with subsidiaries of HF Sinclair resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from subsidiaries of HF Sinclair. These transactions occurred while we were a consolidated variable interest entity of HF Sinclair; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

Note 9:Employees, Retirement and Incentive Plans

Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $3.0 million and $2.4 million for the three months ended March 31, 2023 and 2022, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of March 31, 2023, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.4 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of March 31, 2023, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 771,313 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Phantom Units

Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of phantom unit activity and changes during the three months ended March 31, 2023, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2023 (nonvested)	115,809	$	16.66
Granted	1,479	18.49
Vesting and transfer of full ownership to recipients	(330)	11.92
Forfeited	(804)	11.92
Outstanding at March 31, 2023 (nonvested)	116,154	16.73

The grant date fair values of phantom units that were vested and transferred to recipients during the three months ended March 31, 2023 and 2022 was $4 thousand and $39 thousand, respectively. As of March 31, 2023, $1.1 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 1.1 years.

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Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the three months ended March 31, 2023, is presented below:

Performance Units	Units
Outstanding at January 1, 2023 (nonvested)	42,852
Granted	513
Outstanding at March 31, 2023 (nonvested)	43,365

The grant date fair value of performance units vested and transferred to recipients during the three months ended March 31, 2022 was $0.6 million. Based on the weighted-average fair value of performance units outstanding at March 31, 2023, of $0.7 million, there was $0.5 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.4 years.

During the three months ended March 31, 2023, we did not purchase any common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

Note 10:Debt

Credit Agreement

We have a $1.2 billion senior secured revolving credit facility (the “Credit Agreement”) that matures in July 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the maturity of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of March 31, 2023.

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Senior Notes

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of March 31, 2023, we had $500 million aggregate principal amount of 5% senior unsecured notes due in 2028 (the “5% Senior Notes,” and together with the 6.375% Senior Notes, the “Senior Notes”).

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

Long-term Debt

The carrying amounts of our long-term debt were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Credit Agreement
Amount outstanding	$	651,500	$	668,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(5,695)		(5,953)
	494,305		494,047
6.375% Senior Notes
Principal	400,000		400,000
Unamortized premium and debt issuance costs	(5,420)		(5,713)
	394,580		394,287
Total long-term debt	$	1,540,385	$	1,556,334

Note 11:Related Party Transactions

We serve many of HF Sinclair’s refinery and renewable diesel facilities under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2024 to 2037, and revenues from these agreements accounted for approximately 82% of our total revenues for the three months ended March 31, 2023. Under these agreements, HF Sinclair agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are generally subject to annual rate adjustments on July 1st each year based on increases or decreases in PPI or the FERC index. As of March 31, 2023, these agreements with HF Sinclair require minimum annualized payments to us of $456.6 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

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Under certain provisions of the Omnibus Agreement, we pay HF Sinclair an annual administrative fee (currently $5.0 million) for the provision by HF Sinclair or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HF Sinclair who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HF Sinclair. Also, we reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HF Sinclair and its subsidiaries were as follows:

•Revenues received from HF Sinclair were $116.9 million and $92.3 million for the three months ended March 31, 2023 and 2022, respectively.

•HF Sinclair charged us general and administrative services under the Omnibus Agreement of $1.3 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively.

•We reimbursed HF Sinclair for costs of employees supporting our operations of $20.6 million and $16.1 million for the three months ended March 31, 2023 and 2022, respectively.

•HF Sinclair reimbursed us $1.3 million and $3.1 million for the three months ended March 31, 2023 and 2022, for expense and capital projects, respectively.

•We distributed $20.9 million in both the three months ended March 31, 2023 and 2022, to HF Sinclair as regular distributions on its common units.

•Accounts receivable from HF Sinclair were $71.3 million and $63.5 million at March 31, 2023, and December 31, 2022, respectively.

•Accounts payable to HF Sinclair were $9.9 million and $15.8 million at March 31, 2023, and December 31, 2022, respectively.

•Deferred revenue in the consolidated balance sheets included at March 31, 2023 includes $3.3 million relating to certain shortfall billings to HF Sinclair.

•We received direct financing lease payments from HF Sinclair for use of our Artesia and Tulsa rail yards of $0.6 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

•We received sales-type lease payments of $20.6 million and $12.6 million from HF Sinclair for the three months ended March 31, 2023 and 2022, respectively.

Note 12: Partners’ Equity, Income Allocations and Cash Distributions

As of March 31, 2023, HF Sinclair held 59,630,030 of our common units, constituting a 47% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of March 31, 2023, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds, but no units have been issued under this program during the periods presented.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

Cash Distributions

On April 20, 2023, we announced our cash distribution for the first quarter of 2023 of $0.35 per unit. The distribution is payable on all common units and will be paid May 11, 2023, to all unitholders of record on May 1, 2023.

Our regular quarterly cash distribution to the limited partners will be $44.3 million for the three months ended March 31, 2023 and was $44.3 million for the three months ended March 31, 2022. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

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Note 13: Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners, adjusted for participating securities’ share in earnings, divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from phantom units and performance units. To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands, except per unit data)
Net income attributable to the partners	$	57,522	$	49,559
Less: Participating securities’ share in earnings	(73)		(111)
Net income attributable to common units	57,449		49,448
Weighted average limited partners’ units outstanding	126,440		109,640
Limited partners’ per unit interest in earnings - basic and diluted	$	0.45	$	0.45

Note 14:Environmental

We expensed $0.4 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively, for environmental remediation obligations. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $19.8 million and $19.5 million at March 31, 2023 and December 31, 2022, of which $17.8 million and $17.5 million was classified as other long-term liabilities for March 31, 2023 and December 31, 2022, respectively. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair and/or its subsidiaries, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and its subsidiaries and occurring or existing prior to the date of such transfers.

See Note 18 for a discussion of our share of incurred and accrued environmental remediation and recovery expenses associated with the release of crude oil on the Osage pipeline reflected in our equity in earnings of equity method investments.

Note 15: Contingencies

We are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

Note 16: Segment Information

Although financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: (1) pipelines and terminals, and (2) refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements. For a discussion of these accounting policies and a summary of our derivation of revenue, see Note 1.

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Our pipelines and terminals segment includes our petroleum product and crude pipelines and terminal, tankage and loading rack facilities that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States.

Our Refinery Processing Unit segment consists of five refinery processing units at two of HF Sinclair's refining facility locations.

Pipelines and terminals have been aggregated as one reportable segment as both pipelines and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable segment.

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	90,353	$	73,851
Pipelines and terminals - third-party	26,416		27,944
Refinery processing units - affiliate	26,525		18,403
Total segment revenues	$	143,294	$	120,198
Segment operating income:
Pipelines and terminals	$	55,053	$	49,804
Refinery processing units	11,436		5,582
Total segment operating income	66,489		55,386
Unallocated general and administrative expenses	(4,635)		(4,312)
Interest expense	(25,978)		(13,639)
Interest income	20,400		12,647
Equity in earnings of equity method investments	3,882		3,626
Gain on sale of assets and other	173		101
Income before income taxes	$	60,331	$	53,809
Capital Expenditures:
Pipelines and terminals	$	7,614	$	10,421
Refinery processing units	—		3,726
Total capital expenditures	$	7,614	$	14,147

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	March 31, 2023		December 31, 2022
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	2,134,453	$	2,152,159
Refinery processing units	302,280		304,332
Other	296,367		291,011
Total identifiable assets	$	2,733,100	$	2,747,502

(1) Included goodwill of $342.8 million as of March 31, 2023 and December 31, 2022, respectively.

Note 17: Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary's guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the Senior Notes have been satisfied.

The following financial information presents condensed consolidating balance sheets and statements of income of the Parent, the Guarantor Subsidiaries and the Non-Guarantor subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

As a result of the HEP Transaction, UNEV became a 100% owned subsidiary, and it was subsequently added as a guarantor of the obligations of HEP under the Senior Notes during the second quarter of 2022. UNEV financial information has been included in the Guarantor Subsidiaries financial information for all periods presented.

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Condensed Consolidating Balance Sheet

March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,245	$	(1,130)	$	990	$	—	$	7,105
Accounts receivable	—		86,658		1,414		(1,342)		86,730
Prepaid and other current assets	462		11,472		370		(370)		11,934
Total current assets	7,707		97,000		2,774		(1,712)		105,769
Properties and equipment, net	—		1,385,960		—		—		1,385,960
Operating lease right-of-use assets	—		2,078		—		—		2,078
Net investment in leases	—		524,564		101,954		(101,954)		524,564
Investment in subsidiaries	2,428,056		68,956		—		(2,497,012)		—
Intangible assets, net	—		56,211		—		—		56,211
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		240,007		34,135		—		274,142
Deferred turnaround costs	—		23,363		—		—		23,363
Other assets	5,420		12,831		—		—		18,251
Total assets	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,050	$	396	$	(1,342)	$	28,104
Accrued interest	17,567		—		—		—		17,567
Deferred revenue	—		15,316		—		—		15,316
Accrued property taxes	—		7,101		—		—		7,101
Current operating lease liabilities	—		886		—		—		886
Current finance lease liabilities	—		6,867		—		(2,259)		4,608
Other current liabilities	439		2,054		555		—		3,048
Total current liabilities	18,006		61,274		951		(3,601)		76,630
Long-term debt	1,540,385		—		—		—		1,540,385
Noncurrent operating lease liabilities	—		1,563		—		—		1,563
Noncurrent finance lease liabilities	—		149,828		—		(88,183)		61,645
Other long-term liabilities	216		29,517		—		—		29,733
Deferred revenue	—		21,963		—		—		21,963
Class B unit	—		61,531		—		—		61,531
Equity - partners	882,576		2,428,056		68,956		(2,508,894)		870,694
Equity - noncontrolling interests	—		—		68,956		—		68,956
Total liabilities and equity	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100

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Condensed Consolidating Balance Sheet

December 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,316	$	4,454	$	2,147	$	—	$	10,917
Accounts receivable	—		79,689		1,453		(1,339)		79,803
Prepaid and other current assets	256		12,141		356		(356)		12,397
Total current assets	4,572		96,284		3,956		(1,695)		103,117
Properties and equipment, net	—		1,388,888		—		—		1,388,888
Operating lease right-of-use assets	—		2,317		—		—		2,317
Net investment in leases	—		539,705		101,871		(101,871)		539,705
Investment in subsidiaries	2,432,767		69,754		—		(2,502,521)		—
Intangible assets, net	—		59,300		—		—		59,300
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		235,858		34,746		—		270,604
Deferred turnaround costs	—		24,154		—		—		24,154
Other assets	5,865		10,790		—		—		16,655
Total assets	$	2,443,204	$	2,769,812	$	140,573	$	(2,606,087)	$	2,747,502
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	43,303	$	545	$	(1,339)	$	42,509
Accrued interest	17,992		—		—		—		17,992
Deferred revenue	—		12,087		—		—		12,087
Accrued property taxes	—		5,449		—		—		5,449
Current operating lease liabilities	—		968		—		—		968
Current finance lease liabilities	—		6,560		—		(2,171)		4,389
Other current liabilities	117		1,793		520		—		2,430
Total current liabilities	18,109		70,160		1,065		(3,510)		85,824
Long-term debt	1,556,334		—		—		—		1,556,334
Noncurrent operating lease liabilities	—		1,720		—		—		1,720
Noncurrent finance lease liabilities	—		150,935		—		(88,422)		62,513
Other long-term liabilities	—		29,111		—		—		29,111
Deferred revenue	—		24,613		—		—		24,613
Class B unit	—		60,507		—		—		60,507
Equity - partners	868,760		2,432,767		69,754		(2,514,155)		857,126
Equity - noncontrolling interests	—		—		69,754		—		69,754
Total liabilities and equity	$	2,443,203	$	2,769,813	$	140,573	$	(2,606,087)	$	2,747,502

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Condensed Consolidating Statement of Income

Three Months Ended March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	116,878	$	—	$	—	$	116,878
Third parties	—		26,416		—		—		26,416
	—		143,294		—		—		143,294
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		50,822		1,320		—		52,142
Depreciation and amortization	—		24,663		—		—		24,663
General and administrative	1,482		3,153		—		—		4,635
	1,482		78,638		1,320		—		81,440
Operating income (loss)	(1,482)		64,656		(1,320)		—		61,854
Other income (expense):
Equity in earnings of subsidiaries	84,028		1,752		—		(85,780)		—
Equity in earnings of equity method investments	—		3,173		709		—		3,882
Interest expense	(25,024)		(5,069)		—		4,115		(25,978)
Interest income	—		20,400		4,115		(4,115)		20,400
Gain on sale of assets and other	—		173		—		—		173
	59,004		20,429		4,824		(85,780)		(1,523)
Income before income taxes	57,522		85,085		3,504		(85,780)		60,331
State income tax expense	—		(34)		—		—		(34)
Net income	57,522		85,051		3,504		(85,780)		60,297
Allocation of net income attributable to noncontrolling interests	—		(1,023)		(1,752)		—		(2,775)
Net income attributable to the partners	$	57,522	$	84,028	$	1,752	$	(85,780)	$	57,522

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Condensed Consolidating Statement of Income

Three Months Ended March 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	92,254	$	—	$	—	$	92,254
Third parties	—		27,944		—		—		27,944
	—		120,198		—		—		120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,934		691		—		42,625
Depreciation and amortization	—		22,187		—		—		22,187
General and administrative	1,088		3,224		—		—		4,312
	1,088		67,345		691		—		69,124
Operating income (loss)	(1,088)		52,853		(691)		—		51,074
Other income (expense):
Equity in earnings of subsidiaries	63,327		2,171		—		(65,498)		—
Equity in earnings of equity method investments	—		2,720		906		—		3,626
Interest expense	(12,680)		(5,086)		—		4,127		(13,639)
Interest income	—		12,647		4,127		(4,127)		12,647
Gain on sale of assets and other	—		101		—		—		101
	50,647		12,553		5,033		(65,498)		2,735
Income before income taxes	49,559		65,406		4,342		(65,498)		53,809
State income tax expense	—		(31)		—		—		(31)
Net income	49,559		65,375		4,342		(65,498)		53,778
Allocation of net income attributable to noncontrolling interests	—		(2,048)		(2,171)		—		(4,219)
Net income attributable to the partners	$	49,559	$	63,327	$	2,171	$	(65,498)	$	49,559

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Note 18: Osage Pipeline

On July 8, 2022, the Osage pipeline, which is owned by Osage (see Note 1) and carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. Our equity in earnings of equity method investments was reduced in the three months ended March 31, 2023 by $0.9 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release. From the date of the release through March 31, 2023, our equity in earnings of equity method investments was reduced by $18.5 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release, net of our share of insurance proceeds received to date is $3.0 million. Any additional insurance recoveries will be recorded as they are received. If the Osage insurance policy pays out in full, our share of the remaining insurance coverage is expected to be $10.0 million. As Osage is an equity method investment, its financial position and results are not consolidated into HEP financial statement line items. The financial impact of the Osage crude oil release is reflected on the consolidated balance sheets as a reduction in equity method investments and is reflected on the consolidated statement of income as a reduction in equity in earnings (loss) of equity method investments.

The pipeline resumed operations in the third quarter of 2022 and remediation efforts are underway. It may be necessary for Osage to expend or accrue additional amounts for environmental remediation or other release-related expenses in future periods, but we cannot estimate those amounts at this time. Future costs and accruals could have a material impact on our results of operations and cash flows in the period recorded; however, we do not expect them to have a material impact on our financial position.

Note 19: Subsequent Event

On May 3, 2023, we received a non-binding proposal from HF Sinclair to acquire all of the outstanding common units (“Common Units”) of HEP not beneficially owned by HF Sinclair or its affiliates in exchange for shares of common stock, par value $0.01 per share (“Common Stock”) of HF Sinclair. Under the proposal, HEP unitholders would receive newly issued shares of Common Stock at a fixed exchange ratio of 0.3714 per each publicly held Common Unit, which was derived using the 30-day volume weighted average prices for each security as of market close on May 3, 2023 (the “Proposed HF Sinclair Transaction”). The proposal has been made to the board of directors of our ultimate general partner (the “Board”). It is anticipated that the Board will authorize the Conflicts Committee of the Board (the “Conflicts Committee”), which is comprised of independent members of the Board, to review, evaluate and negotiate the Proposed HF Sinclair Transaction. The Proposed HF Sinclair Transaction is subject to the negotiation and execution of a definitive agreement. There can be no assurance that a definitive agreement will be executed or that any transaction will be approved or consummated.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 2, including but not limited to the sections under “Results of Operations” and “Liquidity and Capital Resources,” contains forward-looking statements. See “Forward-Looking Statements” at the beginning of Part I of this Quarterly Report on Form 10-Q. In this document, the words “we,” “our,” “ours” and “us” refer to Holly Energy Partners, L.P. (“HEP”) and its consolidated subsidiaries or to HEP or an individual subsidiary and not to any other person.

References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation Company LLC (“Sinclair Transportation”) and its consolidated subsidiaries (collectively, the “HEP Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the HEP Acquired Sinclair Businesses.

References herein to HF Sinclair Corporation (“HF Sinclair”) with respect to time periods prior to March 14, 2022 refer to HollyFrontier Corporation (“HFC”) and its consolidated subsidiaries and do not include Hippo Holding LLC (now known as Sinclair Holding LLC), Sinclair Transportation or their respective consolidated subsidiaries (collectively, the “HFS Acquired Sinclair Businesses”). References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which include the operations of the combined business operations of HFC and the HFS Acquired Sinclair Businesses.

OVERVIEW

HEP, together with its consolidated subsidiaries, is a publicly held master limited partnership. On March 14, 2022 (the “Closing Date”), HFC and HEP announced the establishment of HF Sinclair, as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation from REH Company (formerly known as The Sinclair Companies, and referred to herein as “REH Company”). On the Closing Date, HF Sinclair completed its acquisition of Sinclair Oil by effecting (a) a holding company merger with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby REH Company contributed all of the equity interests of Hippo Holding LLC (now known as Sinclair Holding LLC), the parent company of Sinclair Oil (the “Target Company”), to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of March 31, 2023, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

Additionally, on the Closing Date and immediately prior to consummation of the HFC Transactions, HEP acquired all of the outstanding equity interests of Sinclair Transportation from REH Company in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $329.0 million, inclusive of final working capital adjustments for an aggregate transaction value of $678.0 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, together with its subsidiaries, owned REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the REH Company refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Investments Corp. (49.995% non-operated interest); and UNEV Pipeline, LLC (“UNEV”) (the 25% non-operated interest not already owned by HEP, resulting in UNEV becoming a wholly owned subsidiary of HEP).

See Notes 1 and 2 of Notes to Consolidated Financial Statements included in “Item 1. Financial Statements” for additional information regarding the acquisitions.

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Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support the refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. HEP, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Colorado, Idaho, Iowa, Kansas, Missouri, Nevada, New Mexico, Oklahoma, Texas, Utah, Washington and Wyoming as well as refinery processing units in Utah and Kansas.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not directly exposed to changes in commodity prices.

We believe the long-term global refined product demand and U.S. crude production should support high utilization rates for the refineries we serve, which in turn should support volumes in our product pipelines, crude gathering systems and terminals.

HF Sinclair Proposal

On May 3, 2023, we received a non-binding proposal from HF Sinclair to acquire all of the outstanding common units (“Common Units”) of HEP not beneficially owned by HF Sinclair or its affiliates in exchange for shares of common stock, par value $0.01 per share (“Common Stock”) of HF Sinclair. Under the proposal, HEP unitholders would receive newly issued shares of Common Stock at a fixed exchange ratio of 0.3714 per each publicly held Common Unit, which was derived using the 30-day volume weighted average prices for each security as of market close on May 3, 2023 (the “Proposed HF Sinclair Transaction”). The proposal has been made to the board of directors of our ultimate general partner (the “Board”). It is anticipated that the Board will authorize the Conflicts Committee of the Board (the “Conflicts Committee”), which is comprised of independent members of the Board, to review, evaluate and negotiate the Proposed HF Sinclair Transaction. The Proposed HF Sinclair Transaction is subject to the negotiation and execution of a definitive agreement. There can be no assurance that a definitive agreement will be executed or that any transaction will be approved or consummated.

Market Developments

Our results for the three months ended March 31, 2023 were favorably impacted by global demand for transportation fuels, lubricants and transportation and terminal services having returned to pre-pandemic levels. We expect our customers will continue to adjust refinery production levels commensurate with market demand. The extent to which HEP’s future results are affected by the COVID-19 pandemic or volatile regional and global economic conditions will depend on various factors and consequences beyond our control. However, we have long-term customer contracts with minimum volume commitments, which have expiration dates from 2024 to 2037. These minimum volume commitments accounted for approximately 72% and 69% of our total tariffs and fees billed to customers for the three months ended March 31, 2023 and March 31, 2022, respectively. We are currently not aware of any reasons that would prevent such customers from making the minimum payments required under the contracts or potentially making payments in excess of the minimum payments. In addition to these payments, we also expect to collect payments for services provided to uncommitted shippers.

Agreements with HF Sinclair

We serve HF Sinclair’s refineries under long-term pipeline, terminal, tankage and refinery processing unit throughput agreements expiring from 2024 to 2037. Under these agreements, HF Sinclair agrees to transport, store, and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminal, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are subject to annual rate adjustments on July 1st each year based on the PPI or the FERC index. On December 17, 2020, FERC established a new price index for the five-year period commencing July 1, 2021 and ending June 30, 2026, in which common carriers charging indexed rates were permitted to adjust their indexed ceilings annually by Producer Price Index plus 0.78%. FERC received requests for rehearing of its December 17, 2020 order, and on January 20, 2022, FERC revised the index level used to determine the annual changes to interstate oil pipeline rate ceilings to Producer Price Index minus 0.21%. The order required the recalculation of the July 1, 2021 index ceilings to be effective as of March 1, 2022. As of March 31, 2023, these agreements with HF Sinclair require minimum annualized payments to us of $457 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of the agreements, a shortfall payment may be applied as a credit in the following four quarters after minimum obligations are met.

A significant reduction in revenues under these agreements could have a material adverse effect on our results of operations.

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Under certain provisions of an omnibus agreement we have with HF Sinclair (the “Omnibus Agreement”), we pay HF Sinclair an annual administrative fee, currently $5.0 million, for the provision by HF Sinclair or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HF Sinclair who perform services for us on behalf of Holly Logistic Services, L.L.C. (“HLS”), or the cost of their employee benefits, which are separately charged to us by HF Sinclair. We also reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Under HLS’s Secondment Agreement with HF Sinclair, certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs of these employees for our benefit.

We have a long-term strategic relationship with HFC (and now HF Sinclair) that has historically facilitated our growth. Subject to the final negotiated terms of a definitive agreement with HF Sinclair on the Proposed HF Sinclair Transaction and the discretion of our Board, our future growth plans include organic projects around our existing assets and select investments or acquisitions that enhance our service platform while creating accretion for our unitholders.

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RESULTS OF OPERATIONS (Unaudited)

Income, Distributable Cash Flow, Volumes and Balance Sheet Data

The following tables present income, distributable cash flow and volume information for the three months ended March 31, 2023 and 2022.

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	Three Months Ended March 31,				Change from
	2023		2022		2022
	(In thousands, except per unit data)
Revenues:
Pipelines:
Affiliates—refined product pipelines	$	18,931	$	16,860	$	2,071
Affiliates—intermediate pipelines	8,282		7,506		776
Affiliates—crude pipelines	24,667		18,277		6,390
	51,880		42,643		9,237
Third parties—refined product pipelines	6,268		9,260		(2,992)
Third parties—crude pipelines	12,434		12,877		(443)
	70,582		64,780		5,802
Terminals, tanks and loading racks:
Affiliates	38,473		31,208		7,265
Third parties	7,714		5,807		1,907
	46,187		37,015		9,172
Refinery processing units—Affiliates	26,525		18,403		8,122
Total revenues	143,294		120,198		23,096
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	52,142		42,625		9,517
Depreciation and amortization	24,663		22,187		2,476
General and administrative	4,635		4,312		323
	81,440		69,124		12,316
Operating income	61,854		51,074		10,780
Other income (expense):
Equity in earnings of equity method investments	3,882		3,626		256
Interest expense, including amortization	(25,978)		(13,639)		(12,339)
Interest income	20,400		12,647		7,753
Gain on sale of assets and other	173		101		72
	(1,523)		2,735		(4,258)
Income before income taxes	60,331		53,809		6,522
State income tax expense	(34)		(31)		(3)
Net income	60,297		53,778		6,519
Allocation of net income attributable to noncontrolling interests	(2,775)		(4,219)		1,444
Net income attributable to the partners	57,522		49,559		7,963
Limited partners’ earnings per unit—basic and diluted	$	0.45	$	0.45	$	—
Weighted average limited partners’ units outstanding	126,440		109,640		16,800
EBITDA (1)	$	87,797	$	72,769	$	15,028
Adjusted EBITDA (1)	$	108,357	$	85,338	$	23,019
Distributable cash flow (2)	$	83,911	$	64,455	$	19,456
Volumes (bpd)
Pipelines:
Affiliates—refined product pipelines	143,002		107,210		35,792
Affiliates—intermediate pipelines	114,326		117,802		(3,476)
Affiliates—crude pipelines	473,712		396,040		77,672
	731,040		621,052		109,988
Third parties—refined product pipelines	40,431		49,029		(8,598)
Third parties—crude pipelines	175,984		131,126		44,858
	947,455		801,207		146,248
Terminals and loading racks:
Affiliates	686,845		446,032		240,813
Third parties	42,462		48,354		(5,892)
	729,307		494,386		234,921
Refinery processing units—Affiliates	53,294		65,227		(11,933)
Total for pipelines and terminal and refinery processing unit assets (bpd)	1,730,056		1,360,820		369,236

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(1)Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to the partners plus or minus (i) interest expense, (ii) interest income, (iii) state income tax expense and (iv) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus (i) our share of Osage environmental remediation costs included in equity in earnings of equity method investments, (ii) acquisition integration and regulatory costs, (iii) tariffs and fees not included in revenues due to impacts from lease accounting for certain tariffs and fees minus (iv) pipeline lease payments not included in operating costs and expenses. Portions of our minimum guaranteed tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recorded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles (“GAAP”). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to the partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for compliance with financial covenants.

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net income attributable to the partners	$	57,522	$	49,559
Add (subtract):
Interest expense	25,978		13,639
Interest income	(20,400)		(12,647)
State income tax expense	34		31
Depreciation and amortization	24,663		22,187
EBITDA	$	87,797	$	72,769
Share of Osage environmental remediation costs	870		—
Acquisition integration and regulatory costs	—		836
Tariffs and fees not included in revenues	21,296		13,339
Lease payments not included in operating costs	(1,606)		(1,606)
Adjusted EBITDA	$	108,357	$	85,338

(2)Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. Set forth below is our calculation of distributable cash flow.

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	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net income attributable to the partners	$	57,522	$	49,559
Add (subtract):
Depreciation and amortization	24,663		22,187
Amortization of discount and deferred debt issuance costs	1,071		770
Customer billings greater than net income recognized	4,873		497
Maintenance capital expenditures (3)	(1,702)		(5,620)
Increase (decrease) in environmental liability	(139)		(120)
Share of Osage insurance coverage	500		—
Decrease in reimbursable deferred revenue	(5,405)		(3,234)
Other	2,528		416
Distributable cash flow	$	83,911	$	64,455

(3)Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.

	March 31, 2023		December 31, 2022
	(In thousands)
Balance Sheet Data
Cash and cash equivalents	$	7,105	$	10,917
Working capital	$	29,139	$	17,293
Total assets	$	2,733,100	$	2,747,502
Long-term debt	$	1,540,385	$	1,556,334
Partners’ equity	$	870,694	$	857,126

Results of Operations—Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022

Summary

Net income attributable to the partners for the first quarter of 2023 was $57.5 million ($0.45 per basic and diluted limited partner unit) compared to $49.6 million ($0.45 per basic and diluted limited partner unit) for the first quarter of 2022. The increase in net income was mainly due to net income from Sinclair Transportation, which was acquired on March 14, 2022, as well as higher revenues from our Woods Cross refinery processing units, partially offset by higher interest expense.

Revenues

Revenues for the first quarter were $143.3 million, an increase of $23.1 million compared to the first quarter of 2022. The increase was mainly due to revenues from the acquired Sinclair Transportation assets, higher revenues on our Woods Cross refinery processing units, which were down for a scheduled turnaround in March 2022, and rate increases that went into effect on July 1, 2022, partially offset by lower revenues on our product pipelines servicing HF Sinclair's Navajo refinery.

Revenues from our refined product pipelines were $25.2 million, a decrease of $0.9 million compared to the first quarter of 2022. Shipments averaged 183.4 thousand barrels per day (“mbpd”) compared to 156.2 mbpd for the first quarter of 2022. The volume increase was mainly due to higher volumes on the acquired Sinclair Transportation product pipelines. The decrease in revenues was mainly due to lower volumes on our product pipelines serving HF Sinclair's Navajo refinery. Revenues were lower in proportion to volumes due to our recognition of a significant portion of the Sinclair Transportation refined product pipeline tariffs as interest income under sales-type lease accounting.

Revenues from our intermediate pipelines were $8.3 million, an increase of $0.8 million compared to the first quarter of 2022. Shipments averaged 114.3 mbpd for the first quarter of 2023 compared to 117.8 mbpd for the first quarter of 2022. The increase in revenue was mainly due to rate increases that went into effect on July 1, 2022.

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Revenues from our crude pipelines were $37.1 million, an increase of $5.9 million compared to the first quarter of 2022. Shipments averaged 649.7 mbpd compared to 527.2 mbpd for the first quarter of 2022. The increase in volumes was mainly attributable to the acquired Sinclair Transportation crude pipelines and higher volumes on our crude pipeline systems in New Mexico and Texas. The increase in revenues was mainly due to the acquired Sinclair Transportation crude pipelines, higher volumes on our crude pipeline systems in New Mexico and Texas and rate increases that went into effect on July 1, 2022.

Revenues from terminal, tankage and loading rack fees were $46.2 million, an increase of $9.2 million compared to the first quarter of 2022. Refined products and crude oil terminalled in the facilities averaged 729.3 mbpd compared to 494.4 mbpd for the first quarter of 2022. The increase in volumes was mainly due to the acquired Sinclair Transportation assets. Revenues increased mainly due to revenues from the acquired Sinclair Transportation assets and rate increases that went into effect on July 1, 2022.

Revenues from refinery processing units were $26.5 million, an increase of $8.1 million compared to the first quarter of 2022, and throughputs averaged 53.3 mbpd compared to 65.2 mbpd for the first quarter of 2022. Revenues increased mainly due to higher revenues from our Woods Cross refinery processing units, which were down for a scheduled turnaround in March 2022, as well as rate increases that went into effect on July 1, 2022. The decrease in volumes was due to maintenance at the El Dorado refinery.

Operations Expense

Operations (exclusive of depreciation and amortization) expense was $52.1 million for the three months ended March 31, 2023, an increase of $9.5 million compared to the first quarter of 2022. The increase was mainly due to operations expenses associated with the acquired Sinclair Transportation assets as well as higher employee costs and higher natural gas costs for the three months ended March 31, 2023.

Depreciation and Amortization

Depreciation and amortization for the three months ended March 31, 2023 increased by $2.5 million compared to the three months ended March 31, 2022. The increase was mainly due to depreciation on the acquired Sinclair Transportation assets and amortization of the Woods Cross refinery processing units turnaround.

General and Administrative

General and administrative costs for the three months ended March 31, 2023 increased by $0.3 million compared to the three months ended March 31, 2022, mainly due to higher external audit expenses and higher administrative fees charged by HF Sinclair under the Omnibus Agreement, partially offset by lower acquisition integration and regulatory costs associated with the HEP Transaction.

Equity in Earnings of Equity Method Investments

	Three Months Ended March 31,
Equity Method Investment	2023		2022
	(in thousands)
Osage Pipe Line Company, LLC	(939)		643
Cheyenne Pipeline LLC	1,374		1,774
Cushing Connect Terminal Holdings LLC	709		906
Pioneer Investments Corp.	3,202		465
Saddle Butte Pipeline III, LLC	(464)		(162)
Total	$	3,882	$	3,626

Equity in earnings of Osage Pipe Line Company, LLC (“Osage”) decreased for the three months ended March 31, 2023, mainly due to our 50% share of environmental remediation and recovery expenses associated with the release of crude oil on the Osage pipeline. Additional insurance recoveries will be recorded as they are received. If the Osage insurance pays out in full, our share of the remaining insurance coverage is expected to be $10.0 million. The pipeline resumed operations in the third quarter of 2022 and remediation efforts are underway. Pioneer Investments Corp. and Saddle Butte Pipeline III, LLC were acquired during the first quarter of 2022 as part of the HEP Transaction.

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Interest Expense, including Amortization

Interest expense for the three months ended March 31, 2023, was $26.0 million, an increase of $12.3 million compared to the three months ended March 31, 2022. The increase was mainly due to our April 2022 issuance of $400 million in aggregate principal amount of 6.375% senior unsecured notes maturing in April 2027, the proceeds of which were used to partially repay outstanding borrowings under our senior secured credit facility following the funding of the cash portion of the Sinclair Transportation acquisition. In addition, market interest rates increased on our senior secured revolving credit facility. Our aggregate effective interest rates were 6.4% and 3.5% for the three months ended March 31, 2023 and 2022, respectively.

Interest Income

Interest income for the three months ended March 31, 2023, totaled $20.4 million, an increase of $7.8 million compared to the three months ended March 31, 2022. The increase was mainly due to higher sales-type lease interest income from the acquired Sinclair Transportation pipelines and terminals.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

We have a $1.2 billion senior secured revolving credit facility (the “Credit Agreement”) that matures July 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

During the three months ended March 31, 2023, we received advances totaling $42.0 million and repaid $58.5 million under the Credit Agreement, resulting in a net decrease of $16.5 million and an outstanding balance of $651.5 million at March 31, 2023. As of March 31, 2023, we have no letters of credit outstanding under the Credit Agreement and the available capacity under the Credit Agreement was $548.5 million. Amounts repaid under the Credit Agreement may be reborrowed from time to time.

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of March 31, 2023, we had $500 million in aggregate principal amount of 5% Senior Notes due in 2028 (the “5% Senior Notes”, and together with the 6.375% Senior Notes, the “Senior Notes”).

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. We did not issue any units under this program during the three months ended March 31, 2023. As of March 31, 2023, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds.

Under our registration statement filed with the Securities and Exchange Commission (“SEC”) using a “shelf” registration process, we currently have the authority to raise up to $2.0 billion by offering securities, through one or more prospectus supplements that would describe, among other things, the specific amounts, prices and terms of any securities offered and how the proceeds would be used. Any proceeds from the sale of securities are expected to be used for general business purposes, which may include, among other things, funding acquisitions of assets or businesses, working capital, capital expenditures, investments in subsidiaries, the retirement of existing debt and/or the repurchase of common units or other securities.

We believe our current sources of liquidity, including cash balances, future internally generated funds, any future issuances of debt or equity securities and funds available under the Credit Agreement will provide sufficient resources to meet our working capital liquidity, capital expenditure and quarterly distribution needs for the foreseeable future. Future securities issuances, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

In February 2023, we paid a regular quarterly cash distribution of $0.35 on all units in an aggregate amount of $44.3 million.

On April 20, 2023, we announced our cash distribution for the first quarter of 2023 of $0.35 per unit, or $1.40 on an annualized basis. Subject to the final negotiated terms of a definitive agreement with HF Sinclair on the Proposed HF Sinclair Transaction and the discretion of our Board, we expect our future cash distribution will continue as long as we remain a public company.

Cash and cash equivalents decreased by $3.8 million during the three months ended March 31, 2023. The cash flows used for investing activities of $9.3 million and financing activities of $64.4 million were more than the cash flows provided by operating activities of $69.8 million. Working capital increased by $11.8 million to $29.1 million at March 31, 2023, from $17.3 million at December 31, 2022.

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Cash Flows—Operating Activities

Cash flows from operating activities decreased by $2.0 million from $71.8 million for the three months ended March 31, 2022, to $69.8 million for the three months ended March 31, 2023. The decrease was mainly due to higher payments for operating expenses and interest expenses, partially offset by higher customer receipts and lower payments for turnaround expenditures during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Cash Flows—Investing Activities

Cash flows used for investing activities were $9.3 million for the three months ended March 31, 2023, compared to $333.8 million for the three months ended March 31, 2022, a decrease of $324.5 million. During the three months ended March 31, 2022, we paid the $321.4 million cash portion of the purchase price consideration for our acquisition of Sinclair Transportation. During the three months ended March 31, 2023 and 2022, we invested $7.6 million and $14.1 million, respectively, in additions to properties and equipment.

Cash Flows—Financing Activities

Cash flows used by financing activities were $64.4 million for the three months ended March 31, 2023, compared to cash flows provided by financing activities of $262.6 million for the three months ended March 31, 2022, a decrease of $327.0 million. During the three months ended March 31, 2023, we received $42.0 million and repaid $58.5 million in advances under the Credit Agreement. Additionally, we paid $44.3 million in regular quarterly cash distributions to our limited partners and $2.5 million to our noncontrolling interests. During the three months ended March 31, 2022, we received $360.0 million and repaid $58.5 million in advances under the Credit Agreement. We paid $37.0 million in regular quarterly cash distributions to our limited partners, and distributed $0.9 million to our noncontrolling interests.

Capital Requirements

Our pipeline and terminalling operations are capital intensive, requiring investments to maintain, expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted of, and are expected to continue to consist of, maintenance capital expenditures and expansion capital expenditures. “Maintenance capital expenditures” represent capital expenditures to replace partially or fully depreciated assets to maintain the operating capacity of existing assets. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations. “Expansion capital expenditures” represent capital expenditures to expand the operating capacity of existing or new assets, but exclude acquisitions. Expansion capital expenditures include expenditures to grow our business and to expand existing facilities, such as projects that increase throughput capacity on our pipelines and in our terminals. Repair and maintenance expenses associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

Each year the board of directors of HLS, our ultimate general partner, approves our annual capital budget, which specifies capital projects that our management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities arise, additional projects may be approved. The funds allocated for a particular capital project may be expended over a period in excess of a year, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures approved for capital projects included in the current year’s capital budget as well as, in certain cases, expenditures approved for capital projects in capital budgets for prior years. Our current 2023 capital forecast is comprised of approximately $25 million to $35 million for maintenance capital expenditures and $5 million to $10 million for expansion capital expenditures and our share of Joint Venture investments. In addition to our capital budget, we may spend funds periodically to perform capital upgrades or additions to our assets where a customer reimburses us for such costs. The upgrades or additions would generally benefit the customer over the remaining life of the related service agreements.

We expect that our currently planned sustaining and maintenance capital expenditures, as well as expenditures for capital development projects, will be funded with cash generated by operations. We expect that, to the extent necessary, we can raise additional funds from time to time through equity or debt financings in the public and private capital markets.

Under the terms of the transaction to acquire HFC’s 75% interest in UNEV, we issued to a subsidiary of HFC a Class B unit comprising a noncontrolling equity interest in a wholly owned subsidiary subject to redemption to the extent that HFC is entitled to a 50% interest in 75% of annual UNEV earnings before interest, income taxes, depreciation, and amortization above $40 million beginning July 1, 2015, and ending in June 2032, subject to certain limitations. However, to the extent earnings thresholds are not achieved, no redemption payments are required. No redemption payments have been required to date.

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Credit Agreement

We have a $1.2 billion Credit Agreement that matures in July 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit, and it continues to provide for an accordion feature that allows us to increase the commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the expiration of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of March 31, 2023.

Senior Notes

As of March 31, 2023, we had $500 million in aggregate principal amount of 5% Senior Notes due in 2028 (the “5% Senior Notes,” and together with the 6.375% Senior Notes, the “Senior Notes”).

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of the 6.375% Senior Notes. The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. We were in compliance with the restrictive covenants for the Senior Notes as of March 31, 2023. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

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Long-term Debt

The carrying amounts of our long-term debt are as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Credit Agreement
Amount outstanding	$	651,500	$	668,000
5% Senior Notes
Principal	500,000		500,000
Unamortized debt issuance costs	(5,695)		(5,953)
	494,305		494,047
6.375% Senior Notes
Principal	400,000		400,000
Unamortized debt issuance costs	(5,420)		(5,713)
	394,580		394,287
Total long-term debt	$	1,540,385	$	1,556,334

Contractual Obligations

There were no significant changes to our long-term contractual obligations during the quarter ended March 31, 2023.

Impact of Inflation

After being relatively moderate in recent years, PPI in the United States increased significantly in 2023 and 2022. PPI has increased an average of 5% annually over the past five calendar years, including an increase of 13.5% in 2022 and 8.9% in 2021.

The substantial majority of our revenues are generated under long-term contracts that provide for increases or decreases in our rates and minimum revenue guarantees annually for increases or decreases in the PPI. These annual rate adjustments generally occur on July 1st each year based on the PPI or the FERC index increase or decrease during the prior year. Certain of these contracts have provisions that limit the level of annual PPI percentage rate increases or decreases, and the majority of our rates do not decrease when PPI is negative. The substantial majority of our rates and minimum revenue guarantees used the 2021 PPI increase of 8.9% in the July 1, 2022 rate increase calculations.

A significant and prolonged period of high inflation or a significant and prolonged period of negative inflation could adversely affect our cash flows and results of operations if costs increase at a rate greater than the fees we charge our shippers. However, the fees we charged our shippers increased at a rate greater than our inflationary cost increase for the year ended December 31, 2022.

Environmental Matters

Our operation of pipelines, terminals, and associated facilities in connection with the transportation and storage of refined products and crude oil is subject to stringent and complex federal, state, and local laws and regulations governing the discharge of materials into the environment, or otherwise relating to the protection of the environment. As with the industry generally, compliance with existing and anticipated laws and regulations increases our overall cost of business, including our capital costs to construct, maintain, and upgrade equipment and facilities. While these laws and regulations affect our maintenance capital expenditures and net income, we believe that they do not affect our competitive position given that the operations of our competitors are similarly affected. However, these laws and regulations, and the interpretation or enforcement thereof, are subject to frequent change by regulatory authorities, and we are unable to predict the ongoing cost to us of complying with these laws and regulations or the future impact of these laws and regulations on our operations. Violation of environmental laws, regulations, and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions, and construction bans or delays. A major discharge of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expense, including both the cost to comply with applicable laws and regulations and claims made by employees, neighboring landowners and other third parties for personal injury and property damage.

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Contamination resulting from spills of refined products and crude oil is not unusual within the petroleum pipeline industry. Historic spills along our existing pipelines and terminals as a result of past operations have resulted in contamination of the environment, including soils and groundwater. Some environmental laws impose liability without regard to fault or the legality of the original act on certain classes of persons that contributed to the releases of hazardous substances or petroleum hydrocarbon substances into the environment. These persons include the owner or operator of the site or sites where the release occurred and companies that disposed of, or arranged for the disposal of, the hazardous substances found at the site. Such persons may be subject to strict, joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of certain health studies. Site conditions, including soils and groundwater, are being evaluated at a few of our properties where operations may have resulted in releases of hydrocarbons and other wastes.

There are environmental remediation projects in progress, including assessment and monitoring activities, that relate to certain assets acquired from HF Sinclair. Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and occurring or existing prior to the date of such transfers.

We have an environmental agreement with Delek with respect to pre-closing environmental costs and liabilities relating to the pipelines and terminals acquired from Delek in 2005, under which Delek will indemnify us subject to certain monetary and time limitations.

At March 31, 2023, we had an accrual of $19.8 million related to environmental clean-up projects for which we have assumed liability, including accrued environmental liabilities assumed in the Sinclair Transportation acquisition that have been fair valued at $14.7 million as of the acquisition date, or for which the indemnity provided for by HF Sinclair has expired or will expire.

On July 8, 2022, the Osage pipeline, which carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. Our equity in earnings (loss) of equity method investments was reduced in the three months ended March 31, 2023 by $0.9 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release. From the date of the release through March 31, 2023, our equity in earnings of equity method investments was reduced by $18.5 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release, net of our share of insurance proceeds received to date of $3.0 million. Any additional insurance recoveries will be recorded as they are received. If the Osage insurance policy pays out in full, our share of the remaining insurance coverage is expected to be $10.0 million. The pipeline resumed operations in the third quarter of 2022 and remediation efforts are underway. It may be necessary for Osage to expend or accrue additional amounts for environmental remediation or other release-related expenses in future periods, but we cannot estimate those amounts at this time. Future costs and accruals could have a material impact on our results of operations and cash flows in the period recorded; however, we do not expect them to have a material impact on our financial position.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could materially differ from these estimates under different assumptions or conditions and have an impact on our financial position, results of operations and cash flows. Our significant accounting policies are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2022. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include revenue recognition, assessing the possible impairment of certain long-lived assets and goodwill, and assessing contingent liabilities for probable losses. There have been no changes to these policies in 2023. We consider these policies to be critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

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RISK MANAGEMENT

The market risk inherent in our debt positions is the potential change arising from increases or decreases in interest rates as discussed below.

At March 31, 2023, we had an outstanding principal balance of $900 million on our Senior Notes. A change in interest rates generally would affect the fair value of the Senior Notes, but not our earnings or cash flows. At March 31, 2023, the fair value of our Senior Notes was $866.9 million. We estimate a hypothetical 10% change in the yield-to-maturity applicable to the Senior Notes at March 31, 2023 would result in a change of approximately $22.3 million in the fair value of the underlying Senior Notes.

For the variable rate Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At March 31, 2023, borrowings outstanding under the Credit Agreement were $651.5 million. A hypothetical 10% change in interest rates applicable to the Credit Agreement would not materially affect our cash flows.

Our operations are subject to catastrophic losses, operational hazards and unforeseen interruptions, including but not limited to fire, explosion, releases or spills, cyberattacks, weather-related perils, vandalism, power failures, mechanical failures and other events beyond our control. We maintain various insurance coverages, including general liability, property damage, business interruption and cyber insurance, subject to certain deductibles and insurance policy terms and conditions. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

We have a risk management oversight committee that is made up of members from our senior management. This committee monitors our risk environment and provides direction for activities to mitigate, to an acceptable level, identified risks that may adversely affect the achievement of our goals.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of market risk exposures that we have with respect to our long-term debt, which disclosure should be read in conjunction with the quantitative and qualitative disclosures about market risk contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Since we do not own products shipped on our pipelines or terminalled at our terminal facilities, we do not have direct market risks associated with commodity prices.

Item 4.Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Our principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2023, at a reasonable level of assurance.

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(b) Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, we may become party to legal, regulatory or administrative proceedings or governmental investigations, including environmental and other matters. Damages or penalties may be sought from us in some matters and certain matters may require years to resolve. While the outcome and impact of these proceedings and investigations on us cannot be predicted with certainty, based on advice of counsel and information currently available to us, management believes that the resolution of these proceedings and investigations, through settlement or adverse judgment, will not, either individually or in the aggregate, have a materially adverse effect on our financial condition, results of operations or cash flows.

Item 1A.Risk Factors

Except as described below, there have been no material changes in our risk factors as previously disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. In addition to the other information set forth in this quarterly report, you should consider carefully the information discussed in our 2022 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2022 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or future results.

There can be no assurances that we will enter into a definitive agreement with HF Sinclair related to its proposal to acquire all of our common units that it or its affiliates do not already own, or that we will complete any transactions contemplated by such an agreement.

On May 3, 2023, we received a non-binding proposal from HF Sinclair to acquire all of the outstanding common units (“Common Units”) of HEP not beneficially owned by HF Sinclair or its affiliates in exchange for shares of common stock, par value $0.01 per share (“Common Stock”) of HF Sinclair. Under the proposal, HEP unitholders would receive newly issued shares of Common Stock at a fixed exchange ratio of 0.3714 per each publicly held Common Unit, which was derived using the 30-day volume weighted average prices for each security as of market close on May 3, 2023 (the “Proposed HF Sinclair Transaction”). The proposal has been made to the board of directors of our ultimate general partner (the “Board”). It is anticipated that the Board will authorize the Conflicts Committee of the Board, which is comprised of independent members of the Board, to review, evaluate and negotiate the Proposed HF Sinclair Transaction. The Proposed HF Sinclair Transaction is subject to the negotiation and execution of a definitive agreement. There can be no assurance that a definitive agreement will be executed or that any transaction will be approved or consummated.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

(c) Common Unit Repurchases Made in the Quarter    

The following table discloses purchases of our common units made by us or on our behalf during the first quarter of 2023:

Period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs
January 2023	—	$	—	—	—
February 2023	—	$	—	—	—
March 2023	17	$	18.08	—	—
Total for January to March 2023	17			—	—

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The units reported represent the delivery of 17 common units (which units were previously issued to certain officers and other employees pursuant to phantom unit awards at the time of grant or settlement, as applicable) by such officers and employees to provide funds for the payment of payroll and income taxes due at vesting in the case of officers and employees who did not elect to satisfy such taxes by other means.

Item 6.Exhibits

The Exhibit Index beginning on page 52 of this Quarterly Report on Form 10-Q lists the exhibits that are filed or furnished, as applicable, as part of this Quarterly Report on Form 10-Q.

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Exhibit Index

Exhibit Number	Description
3.1	Second Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P. (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on November 1, 2017, File No. 1-32225).
3.2	First Amended and Restated Agreement of Limited Partnership of HEP Operating Company, L.P. (incorporated by reference to Exhibit 3.2 of Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, File No. 1-32225).
3.3	First Amended and Restated Agreement of Limited Partnership of HEP Logistics Holdings, L.P. (incorporated by reference to Exhibit 3.4 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.4	First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C. (incorporated by reference to Exhibit 3.5 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
3.5	Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C., dated April 27, 2011 (incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on May 3, 2011, File No. 1-32225).
3.6	First Amended and Restated Limited Liability Company Agreement of HEP Logistics GP, L.L.C. (incorporated by reference to Exhibit 3.6 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
10.1†	Ninth Amended and Restated Master Throughput Agreement, by and between Holly Energy Partners - Operating, L.P. and HF Sinclair Refining & Marketing LLC, dated as of February 27, 2023 (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on March 1, 2023, File No. 1-32225).
10.2	Second Amended and Restated Transportation Services Agreement, by and between UNEV Pipeline, LLC and HF Sinclair Refining & Marketing LLC, dated as of February 23, 2023 (incorporated by reference to Exhibit 10.2 of Registrant’s Current Report on Form 8-K filed on March 1, 2023, File No. 1-32225).
10.3*	Third Amendment to Amended and Restated Master Tolling Agreement (Operating Assets), by and between HF Sinclair El Dorado Refining LLC, HF Sinclair Woods Cross Refining LLC and Holly Energy Partners - Operating L.P., dated effective January 1, 2023.
22.1*	Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates whose Securities Collateralize Securities of the Registrant.
31.1*	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101++	The following financial information from Holly Energy Partners, L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statement of Partners’ Equity, and (v) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104++	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

*	Filed herewith.
**	Furnished herewith.
+	Constitutes management contracts or compensatory plans or arrangements.
++	Filed electronically herewith.
†	Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.

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HOLLY ENERGY PARTNERS, L.P.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOLLY ENERGY PARTNERS, L.P.
	(Registrant)
		By: HEP LOGISTICS HOLDINGS, L.P. its General Partner
		By: HOLLY LOGISTIC SERVICES, L.L.C. its General Partner
May 5, 2023		/s/    John Harrison
		John Harrison
		Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
May 5, 2023		/s/    Kenneth P. Norwood
		Kenneth P. Norwood
		Vice President and Controller (Principal Accounting Officer)

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EX-10.3

Execution Version

                        Exhibit 10.3

THIRD AMENDMENT

TO

AMENDED AND RESTATED MASTER TOLLING AGREEMENT

(Operating Assets)

THIS THIRD AMENDMENT TO AMENDED AND RESTATED MASTER TOLLING AGREEMENT (Operating Assets) (this “Amendment”) is entered into as of April 28, 2023 and effective as of January 1, 2023, by and among the Persons set forth on Exhibit A (each hereinafter sometimes referred to as a “Party” and sometimes collectively referred to as the “Parties”).

RECITALS:

A.Effective as of October 1, 2016, the Parties entered into a certain Amended and Restated Master Tolling Agreement (Operating Assets) (as amended by the Amendment to Amended and Restated Master Tolling Agreement, dated January 1, 2017, and the Second Amendment to Amended and Restated Master Tolling Agreement dated October 29, 2018 the “Amended and Restated Master Tolling Agreement”). Capitalized terms used but not otherwise defined in this Amendment have the meanings ascribed to such terms in the Amended and Restated Master Tolling Agreement.

B.Exhibit C-2 to the Amended and Restated Master Tolling Agreement provides for the adjustment of the Tolling Fee based on the aggregate Turnaround Costs actually incurred after the first turnaround on the Applicable Asset.

C.The Parties desire to, among other things, adjust the Tolling Fee for the El Dorado Assets and the Woods Cross Assets as provided in Exhibit C-2 attached to the Amended and Restated Master Tolling Agreement, on the terms and conditions set forth herein.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises and the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend the Amended and Restated Master Tolling Agreement as follows:

1.Incorporation of Recitals. The recitals for this Amendment are fully incorporated herein by the reference thereto with the same force and effect as though recited herein.

2.Amendments to Articles 6, 7 and 10.

a.Section 6.2 of the Amended and Restated Master Tolling Agreement is hereby amended by removing the reference to HollyFrontier and replacing it with “HF Sinclair”.

b.Article 7 of the Amended and Restated Master Tolling Agreement is hereby amended by removing the reference to HollyFrontier and replacing it with “HF Sinclair”.

c.Article 10 of the Amended and Restated Master Tolling Agreement is hereby amended by removing all references to HollyFrontier and replacing them with “HF Sinclair”.

d.Article 10 of the Amended and Restated Master Tolling Agreement is hereby amended by adding a new Section 10.8 as follows:

“10.8     Termination of HollyFrontier Guarantee. HF Sinclair, HEP Operating, the Partnership, HF Sinclair El Dorado and HF Sinclair Woods Cross acknowledge and agree that all obligations of HollyFrontier, pursuant to this Article 10 are hereby terminated, and HollyFrontier shall no longer be a party to this Agreement nor have any obligations hereunder.”

DB1/ 137458606.2

3.Amendment to Exhibit A.

a.Exhibit A of the Amended and Restated Master Tolling Agreement is hereby deleted and replaced, in its entirety, with Exhibit A attached to this Amendment.

4.Amendment to Exhibit B.

a.Exhibit B of the Amended and Restated Master Tolling Agreement is hereby amended by removing the reference to HollyFrontier Woods Cross and replacing it with “HF Sinclair Woods Cross”.

5.Amendment to Exhibit C. Effective as of 12:01 a.m. Central Time on January 1, 2023 Exhibit C-2 attached to the Amended and Restated Master Tolling Agreement is hereby deleted and replaced, in its entirety, with Exhibit C-2 attached to this Amendment.

6.Amendments to Exhibit D.

a.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by removing the definition of “Applicable Refinery Owner” and replacing it as follows:

““Applicable Refinery Owner” means, with respect to the El Dorado Refinery, HF Sinclair El Dorado, and with respect to the Woods Cross Refinery, HF Sinclair Woods Cross.”

b.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by adding the definition of “HF Sinclair” as follows:

““HF Sinclair” means HF Sinclair Corporation, a Delaware corporation.”

c.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by adding the definition of “HF Sinclair El Dorado” as follows:

““HF Sinclair El Dorado” means HF Sinclair El Dorado Refining LLC (f/k/a HollyFrontier El Dorado Refining LLC), a Delaware limited liability company.”

d.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by removing the definition of “El Dorado Refinery Complex” and replacing it as follows:

““El Dorado Refinery Complex” means the refinery complex owned by HF Sinclair El Dorado, commonly known as the El Dorado Refinery, and located in the City of El Dorado, Butler County, Kansas.”

e.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by removing the definition of “HollyFrontier El Dorado”.

f.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by adding the definition of “HF Sinclair Woods Cross” as follows:

““HF Sinclair Woods Cross” means HF Sinclair Woods Cross Refining LLC (f/k/a HollyFrontier Woods Cross Refining LLC), a Delaware limited liability company.”

g.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by removing the definition of “HollyFrontier Woods Cross”.

h.Exhibit D of the Amended and Restated Master Tolling Agreement is hereby amended by removing the definition of “Woods Cross Refinery Complex” and replacing it as follows:

““Woods Cross Refinery Complex” means the refinery complex owned by HF Sinclair Woods Cross, commonly known as the Woods Cross Refinery, and located in the City of West Bountiful, Davis County, Utah.”

2

DB1/ 137458606.2

7.Counterparts. This Amendment may be executed in counterparts each of which shall be deemed an original. An executed counterpart of this Amendment transmitted by facsimile shall be equally as effective as a manually executed counterpart.

8.Successors and Assigns. This Amendment shall inure for the benefit of and shall be binding on each of the Parties and their respective successors and/or assigns.

9.Entire Agreement. This Amendment contains the entire agreement between the Parties as to the subject matter hereof and, except as provided for in this Amendment, the terms and provisions of the Amended and Restated Master Tolling Agreement shall remain in full force and effect.

[Signature page follows]

3

DB1/ 137458606.2

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized officers to be effective as of the date first set forth above.

HEP OPERATING:

    Holly Energy Partners-Operating, L.P.

        By: /s/ Michael C. Jennings

            Michael C. Jennings

            Chief Executive Officer and President

APPLICABLE REFINERY OWNER:

HF Sinclair El Dorado Refining LLC

    (f/k/a HollyFrontier El Dorado Refining LLC)

    HF Sinclair Woods Cross Refining LLC

    (f/k/a HollyFrontier Woods Cross Refining LLC)

        By: /s/ Tim Go

        Tim Go

         President and Chief Operating Officer

4

DB1/ 137458606.2

Exhibit A

to

Amended and Restated Master Tolling Agreement

Parties:

HF Sinclair El Dorado and HEP Operating, as to the El Dorado Assets.

HF Sinclair Woods Cross and HEP Operating, as to the Woods Cross Assets.

Exhibit A-1

DB1/ 137458606.2

Exhibit C-2

to

Amended and Restated Master Tolling Agreement

Applicable Assets; Minimum Throughput Commitment; Tolling Fees and Adjustments; Applicable Term

Appli-cable Assets

Type of Applicable Asset

Products

Minimum Throughput Commit-ment (on a BPD basis)

Tolling Fee*

Tolling Fee Adjustment

PPI Adjust-ment Minimum/ Cap

Fee Adjustment Commence-ment Date

Purchase Price

Accrued Turn-around Cost

Assumed Fuel Gas Cost

Initial Term (all times are Dallas, TX time)

Extension Term (all times are Dallas, TX time)

El Dorado Assets

Naphtha Fractiona-tion Unit

Isopentane1 ISOM Feed Int. Naphtha Reformer Feed

48,750 BPD

$0.4410/BBL2

PPI/DINO Merit Comp Adjustment3 Turnaround Surcharge4 Fuel Gas Surcharge5

Subject to 1% Minimum/ 3% Cap3

July 1, 2017

$25,936,371

$1.6M4

$73,6105

12:01 a.m. on November 1, 2015 (the “Effective Time”) to 12:00 mid-night on October 31, 2030

The Applicable Refinery Owner shall have the option to extend the Applicable Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on November 1, 2030 and ending at 12:00 midnight on October 31, 2035 on the same terms and conditions as in existence for the Initial Term.

Exhibit C2-1

DB1/ 137458606.2

Woods Cross Assets

Crude Unit 2

Naphtha Diesel tower bottoms

14,625 BPD6

$3.0527/ BBL8

PPI/WX Union Annual Increase7 Turn-around Surcharge4 Fuel Gas Surcharge (excluding Polymeri-zation Unit)5

None

July 1, 2017

$64.75M

$8.7M4

$11,871

12:01 a.m. on October 1, 2016 (the “Effective Time”) to 12:00 midnight on September 30, 2031

The Applicable Refinery Owner shall have the option to extend the Applicable Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on October 1, 2031 and ending at 12:00 midnight on September 30, 2036 on the same terms and conditions as in existence for the Initial Term.

FCC Unit 2

Gasoline Light  Cycle Oil Olefins Slurry

7,600 BPD6

$15.6251/BBL8

$176.25M

$7.8M4

$11,566

Polymeriza-tion Unit

Gasoline Butane Propane

2,438 BPD6

$10.8512/ BBL8

$37.0M

$3.2M4

-

*    As of January 1, 2023.

1.    The “Feedstock” for the El Dorado Assets is light naphtha and heavy naphtha. The “Feedstock” for the Woods Cross Assets is as follows: Crude Unit 2 – crude oil; FCC Unit 2 – crude tower bottoms and outside gas oil; Poly Unit – olefins.

2.    El Dorado Only: The Tolling Fee shall never be less than $0.36 per BBL of Feedstock. If as a result of a reduction to the Tolling Fee or Minimum Throughput Commitment for a Contract Quarter pursuant to Section 2.2(d) of the Agreement, the Applicable Refinery Owner has overpaid its Tolling Fees for a Contract Quarter, the Applicable Refinery Owner shall receive a credit against its Tolling Fees due for the following Contract Quarter in the amount of such overpayment.

3.    El Dorado Only: The Tolling Fee, as previously adjusted on a cumulative basis, shall be adjusted on July 1 of each calendar year, commencing July 1, 2017, by an amount equal to a percentage calculated as follows: (A) 0.75 x the change in the PPI as described below, plus (B) 0.25 x the annual HF Sinclair Merit Compensation Adjustment (positive or negative) for such calendar year. The change in the PPI is the upper change in the annual change rounded to four decimal places of the Producers Price Index-Commodities-Finished Goods, (PPI), et al. (“PPI”), produced by the U.S. Department of Labor, Bureaus of Labor Statistics. The series ID is WPUFD49207– located at http://www.bls.gov/data/. The change in PPI for each year shall be calculated as follows: annual PPI index (most current year) less annual PPI index (most current year minus 1) divided by annual PPI index (most current year minus 1); provided that the change in PPI in any year shall not be less than one percent (1%) or more than three percent (3%). For the avoidance of doubt, if the change in PPI in any year is less than one percent (1%) (including if the change in the PPI is negative) it will be rounded up to one percent (1%) and if the change in PPI in any year is greater than three percent (3%) it will be rounded down to three percent (3%). If either index is no longer published, the Parties shall negotiate in good faith to agree on a new index (as applicable) that gives comparable protection against inflation or deflation, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. If the Parties are unable to agree on a new index, a new index will be determined in accordance with the dispute resolution provisions set forth in the Article VIII of Omnibus Agreement, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. The annual HF Sinclair Merit Compensation Adjustment is the company-wide increase (or decrease) in salary for the year in which the adjustment occurs as determined by the HF Sinclair Chief Executive Officer and Chief Human Resources Officer (excluding merit compensation adjustments for executive officers that are determined by the HF Sinclair Board of Directors (or a committee thereof) and excluding any annual increases for union employees). Examples of the annual Tolling Fee adjustment under various scenarios are as follows:

Exhibit C2-2

DB1/ 137458606.2

(1)if the change in PPI is 0% and the DINO Merit Compensation Adjustment is 3.5%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x 3.5%) = 1.625%

(2)if the change in PPI is 2% and the DINO Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 2%) + (0.25 x 2%) = 2%

(3)if the change in PPI is 5% and the DINO Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 3%) + (0.25 x 2%) = 2.75%

(4)if the change in PPI is 0% and the DINO Merit Compensation Adjustment is -2%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x (-2%)) = 0.25%

4.    After the first turnaround on the Applicable Asset during the Applicable Term, HEP Operating will calculate its aggregate Turnaround Costs incurred in connection therewith. In the event such aggregate Turnaround Costs for the Applicable Asset exceeds the Accrued Turnaround Cost set forth above then (A) a turnaround surcharge (the “Turnaround Surcharge”) will be added to the Tolling Fee based on each BBL of Feedstock (using the Minimum Throughput Commitment) in order to allow HEP Operating to recover (i) such Turnaround Costs in excess of the Accrued Turnaround Cost plus (ii) a ten percent (10%) return on such excess (the aggregate amount specified in clauses (i) and (ii), the “Turnaround Payment”). Such Turnaround Surcharge shall be paid by the Applicable Refinery Owner to HEP Operating on each BBL of Feedstock processed through the Applicable Asset until the earlier to occur of (i) the expiration of the Applicable Term or (ii) the recovery by HEP Operating of the Turnaround Payment. In addition, the Tolling Fee will be adjusted by the amount necessary to recover the new estimated turnaround expense for the remainder of the Applicable Term (based on the Minimum Throughput Commitment).

The aggregate Turnaround Costs incurred though December 31, 2022 for the Woods Cross FCC Unit 2 exceeded the Accrued Turnaround Costs set forth above. Therefore, effective January 1, 2023, the tolling fee above has been increased by the amount necessary to recover the new estimated turnaround expense for the remainder of the Applicable Term. At the Woods Cross Refinery, the Turnaround Costs adjustment only applies to the FCC Unit 2 as the other two Applicable Assets at the Woods Cross Refinery did not exceed the Accrued Turnaround costs set forth in the chart above.

In addition, HEP Operating will add a $0.7161/BBL Turnaround Surcharge to the FCC Unit 2 tolling fee to recover the Turnaround Payment. This Turnaround Surcharge should be applied to each BBL of Feedstock until the earlier of (i) the expiration of the Applicable Term or (ii) the aggregate Turnaround Surcharge billings reach $17,170,646 (23.978,000 barrels x $0.7161). The Turnaround Surcharge is not subject to the annual fee adjustment.

5.    If at the end of any calendar month during the Applicable Term the aggregate cost of gas incurred by HEP Operating in connection with the operation of the Applicable Assets exceeds the Assumed Fuel Gas Cost, the Applicable Refinery Owner shall promptly pay to HEP Operating an amount equal to the positive difference, if any, of (i) the aggregate cost of fuel gas incurred by HEP Operating in connection with the operation of the Applicable Assets during such calendar month less (ii) the Assumed Fuel Gas Cost.

6.    Determined on a Contract Quarter basis.

7.    Woods Cross Only: The Tolling Fee, as previously adjusted on a cumulative basis, shall be adjusted on July 1 of each calendar year, commencing July 1, 2017, by an amount equal to a percentage calculated as follows: (A) 0.5 x the change in the PPI as described below, plus (B) 0.5 x the annual increase under the then current Woods Cross union contract. The change in the PPI is the upper change in the annual change rounded to four decimal places of the Producers Price Index-Commodities-Finished Goods, (PPI), et al. (“PPI”), produced by the U.S. Department of Labor, Bureaus of Labor Statistics. The series ID is WPUFD49207– located at http://www.bls.gov/data/. The change in PPI for each year shall be calculated as follows: annual PPI index (most current year) less annual PPI index (most current year minus 1) divided by annual PPI index (most current year minus 1). If either index is no longer published, the Parties shall negotiate in good faith to agree on a new index (as applicable) that gives comparable protection against inflation or deflation, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. If the Parties are unable to agree on a new index, a new index will be determined in accordance with the dispute resolution provisions set forth in the Article VIII of Omnibus Agreement, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. The annual increase under the then current Woods Cross union contract is the annual base pay increase given to union employees at Woods Cross, currently on or about February 1 of each year. Examples of the annual Tolling Fee adjustment under various scenarios are as follows:

Exhibit C2-3

DB1/ 137458606.2

(1)    if the change in PPI is 0% and the annual increase under the then current Woods Cross union contract is 3.5%, the Tolling Fee adjustment would be (0.5 x 0%) + (0.5 x 3.5%) = 1.75%

(2)    if the change in PPI is 2% and the annual increase under the then current Woods Cross union contract is 2%, the Tolling Fee adjustment would be (0.5 x 2%) + (0.5 x 2%) = 2%

(3)    if the change in PPI is 5% and the annual increase under the then current Woods Cross union contract is 2%, the Tolling Fee adjustment would be (0.5 x 5%) + (0.5 x 2%) = 3.5%10.

(4)    if the change in PPI is -1% and the annual increase under the then current Woods Cross union contract is 2%, the Tolling Fee adjustment would be (0.5 x -1%) + (0.5 x 2%) = 0.5%.    

8.     Woods Cross Only: If the Applicable Refinery Owner has overpaid its monthly Tolling Fees after adjustments to Tolling Fees or Minimum Throughput Commitments for a Contract Quarter pursuant to Section 2.2(d) of the Agreement, the Applicable Refinery Owner shall be entitled to apply any such overpayment as a credit against Tolling Fees within the succeeding twelve months for volumes of Feedstock delivered to HEP Operating in excess of the Minimum Throughput Commitment for any of the Applicable Assets. If any such overpayment has not been credited within twelve months of the overpayment, such overpayment shall be credited against Tolling Fees due with respect to any Minimum Throughput Commitment for any of the Applicable Assets, or if there are no such Tolling Fees due, such overpayment shall be credited against any other obligations owed by the Applicable Refinery Owner, or its Affiliates, to HEP Operating.

Exhibit C2-4

DB1/ 137458606.2

EX-22.1

EXHIBIT 22.1

Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates whose Securities Collateralize Securities of the Registrant

The table below sets forth the subsidiaries of Holly Energy Partners, L.P. (the “Partnership”) listed as guarantors or as co-issuer under the Partnership’s Registration Statement on Form S-3 (No. 333-265154).

Entity	Jurisdiction of Incorporation or Organization	Role
Holly Energy Finance Corp.	Delaware	Co-Issuer
Cheyenne Logistics LLC	Delaware	Guarantor
El Dorado Logistics LLC	Delaware	Guarantor
El Dorado Operating LLC	Delaware	Guarantor
El Dorado Osage LLC	Delaware	Guarantor
Frontier Aspen LLC	Delaware	Guarantor
HEP Cheyenne LLC	Delaware	Guarantor
HEP Cushing LLC	Delaware	Guarantor
HEP El Dorado LLC	Delaware	Guarantor
HEP Fin-Tex/Trust-River, L.P.	Texas	Guarantor
HEP Logistics GP, L.L.C.	Delaware	Guarantor
HEP Mountain Home, L.L.C.	Delaware	Guarantor
HEP Navajo Southern, L.P.	Delaware	Guarantor
HEP Oklahoma LLC	Delaware	Guarantor
HEP Pipeline Assets, Limited Partnership	Delaware	Guarantor
HEP Pipeline GP, L.L.C.	Delaware	Guarantor
HEP Pipeline, L.L.C.	Delaware	Guarantor
HEP Refining Assets, L.P.	Delaware	Guarantor
HEP Refining GP, L.L.C.	Delaware	Guarantor
HEP Refining, L.L.C.	Delaware	Guarantor
HEP Tulsa LLC	Delaware	Guarantor
HEP UNEV Holdings LLC	Delaware	Guarantor
HEP UNEV Pipeline LLC	Delaware	Guarantor
HEP Woods Cross, L.L.C.	Delaware	Guarantor
Holly Energy Holdings LLC	Delaware	Guarantor
Holly Energy Partners—Operating, L.P.	Delaware	Guarantor
Holly Energy Storage—Lovington LLC	Delaware	Guarantor
Lovington-Artesia, L.L.C.	Delaware	Guarantor
Roadrunner Pipeline, L.L.C.	Delaware	Guarantor
SLC Pipeline LLC	Delaware	Guarantor
Woods Cross Operating LLC	Delaware	Guarantor
Sinclair Transportation Company LLC	Delaware	Guarantor
Sinclair Logistics LLC	Delaware	Guarantor
Sinclair Pipeline Company LLC	Delaware	Guarantor
UNEV Pipeline, LLC	Delaware	Guarantor

* The above-listed entities also serve as co-issuer and as guarantors, respectively, of the Partnership’s (i) 5.000% Senior Notes due 2028 (the “2028 Notes”) and (ii) 6.375% Senior Notes due 2027 (the “2027 Notes” and together with the 2028 Notes, the “Notes”). The Notes were issued in private offerings to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”) and to persons outside the United States pursuant to Regulation S under the Securities Act.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael C. Jennings, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

05/04/2023	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John Harrison, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

05/04/2023	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended March 31, 2023 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael C. Jennings, Chief Executive Officer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

05/04/2023	/s/ Michael C. Jennings
	Michael C. Jennings
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL

OFFICER OF HOLLY ENERGY PARTNERS, L.P.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying report on Form 10-Q for the quarterly period ended March 31, 2023 and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Harrison, Senior Vice President, Chief Financial Officer and Treasurer of Holly Logistic Services, L.L.C., the general partner of HEP Logistics Holdings, L.P., the general partner of Holly Energy Partners, L.P (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

05/04/2023	/s/ John Harrison
	John Harrison
	Senior Vice President, Chief Financial Officer  and Treasurer

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2023	May 01, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	1-32225
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0833098
Entity Address, Address Line One	2828 N. Harwood,
Entity Address, Address Line Two	Suite 1300
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75201
City Area Code	214
Local Phone Number	871-3555
Title of 12(b) Security	Common Limited Partner Units
Trading Symbol	HEP
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		126,440,201
Entity Registrant Name	HOLLY ENERGY PARTNERS LP
Entity Central Index Key	0001283140
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents (Cushing Connect VIEs: $990 and $2,147, respectively)	$ 7,105	$ 10,917
Accounts receivable:
Trade	15,435	16,344
Affiliates	71,295	63,459
Total accounts receivable	86,730	79,803
Prepaid and other current assets	11,934	12,397
Total current assets	105,769	103,117
Properties and equipment, net	1,385,960	1,388,888
Operating lease right-of-use assets, net	2,078	2,317
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	524,564	539,705
Intangible assets, net	56,211	59,300
Goodwill	342,762	342,762
Equity method investments (Cushing Connect VIEs: $34,135 and $34,746 , respectively)	274,142	270,604
Deferred turnaround costs	23,363	24,154
Other assets	18,251	16,655
Total assets	2,733,100	2,747,502
Accounts payable:
Trade (Cushing Connect VIEs: $323 and $431, respectively)	18,156	26,753
Affiliates	9,948	15,756
Total accounts payable	28,104	42,509
Accrued interest	17,567	17,992
Deferred revenue	15,316	12,087
Accrued property taxes	7,101	5,449
Current operating lease liabilities	886	968
Current finance lease liabilities	4,608	4,389
Other current liabilities	3,048	2,430
Total current liabilities	76,630	85,824
Long-term debt	1,540,385	1,556,334
Noncurrent operating lease liabilities	1,563	1,720
Noncurrent finance lease liabilities	61,645	62,513
Other long-term liabilities	29,733	29,111
Deferred revenue	21,963	24,613
Class B unit	61,531	60,507
Partners’ equity:
Common unitholders (126,440,201 units issued and outstanding at both March 31, 2023 and December 31, 2022)	870,694	857,126
Noncontrolling interests	68,956	69,754
Total equity	939,650	926,880
Total liabilities and equity	$ 2,733,100	$ 2,747,502

XML

CONSOLIDATED BALANCE SHEEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	$ 7,105	$ 10,917
Net investment in leases	524,564	539,705
Equity method investments	274,142	270,604
Trade payable	$ 18,156	$ 26,753
Common unit issued (in shares)	126,440,201	126,440,201
Common units outstanding (in shares)	126,440,201	126,440,201
VIEs
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	$ 990	$ 2,147
Net investment in leases	101,954	101,871
Equity method investments	34,135	34,746
Trade payable	$ 323	$ 431

XML

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues:
Revenues:	$ 143,294	$ 120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	52,142	42,625
Depreciation and amortization	24,663	22,187
General and administrative	4,635	4,312
Total operating costs and expenses	81,440	69,124
Operating income	61,854	51,074
Other income (expense):
Equity in earnings of equity method investments	3,882	3,626
Interest expense	(25,978)	(13,639)
Interest income	20,400	12,647
Gain on sale of assets and other	173	101
Total other income (expense)	(1,523)	2,735
Income before income taxes	60,331	53,809
State income tax expense	(34)	(31)
Net income	60,297	53,778
Allocation of net income attributable to noncontrolling interests	(2,775)	(4,219)
Net income attributable to the partners	$ 57,522	$ 49,559
Limited partners’ per unit interest in earnings— basic (in USD per share)	$ 0.45	$ 0.45
Limited partners’ per unit interest in earnings— diluted (in USD per share)	$ 0.45	$ 0.45
Weighted average limited partners’ units outstanding, basic (in shares)	126,440	109,640
Weighted average limited partners’ units outstanding, diluted (in shares)	126,440	109,640
Affiliates
Revenues:
Revenues:	$ 116,878	$ 92,254
Third parties
Revenues:
Revenues:	$ 26,416	$ 27,944

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities
Net income	$ 60,297	$ 53,778
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,663	22,187
Gain on sale of assets	(79)	(25)
Amortization of deferred charges	1,071	342
Equity-based compensation expense	354	620
Equity in earnings of equity method investments, net of distributions	(1,799)	(520)
(Increase) decrease in operating assets:
Accounts receivable—trade	909	(1,132)
Accounts receivable—affiliates	(7,836)	11,190
Prepaid and other current assets	518	222
Increase (decrease) in operating liabilities:
Accounts payable—trade	(5,322)	5,525
Accounts payable—affiliates	(5,809)	(994)
Accrued interest	(424)	(5,522)
Deferred revenue	579	118
Accrued property taxes	1,652	1,675
Other current liabilities	619	2,337
Turnaround expenditures	(359)	(17,523)
Other, net	780	(464)
Net cash provided by operating activities	69,814	71,814
Cash flows from investing activities
Additions to properties and equipment	(7,614)	(14,147)
Acquisition of Sinclair Transportation	0	(321,366)
Investment in Osage Pipe Line Company, LLC	(2,500)	0
Proceeds from sale of assets	92	33
Distributions in excess of equity in earnings of equity investments	760	1,704
Net cash used for investing activities	(9,262)	(333,776)
Cash flows from financing activities
Borrowings under credit agreement	42,000	360,000
Repayments of credit agreement borrowings	(58,500)	(58,500)
Distributions to HEP unitholders	(44,308)	(36,997)
Distributions to noncontrolling interests	(2,549)	(877)
Payments on finance leases	(1,012)	(881)
Units withheld for tax withholding obligations	0	(57)
Other	5	(91)
Net cash provided (used) by financing activities	(64,364)	262,597
Cash and cash equivalents
Increase (decrease) for the period	(3,812)	635
Beginning of period	10,917	14,381
End of period	7,105	15,016
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$ 25,506	$ 18,548

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	UNEV	Common Units	Common Units UNEV	Noncontrolling Interests	Noncontrolling Interests UNEV
Balance, beginning of period at Dec. 31, 2021	$ 590,549		$ 443,017		$ 147,532
Increase (Decrease) in Partners' Equity [Roll Forward]
Issuance of common units	349,020		349,020
Distributions to HEP unitholders	(36,997)		(36,997)
Distributions to noncontrolling interests	(877)				(877)
Acquisition of remaining UNEV interests	(956)	$ (61,650)	(956)	$ 16,537		$ (78,187)
Amortization of restricted and performance units	620		620
Class B unit accretion	(956)	$ (61,650)	(956)	$ 16,537		$ (78,187)
Other	(147)		(147)
Net income	53,778		50,515		3,263
Balance, end of period at Mar. 31, 2022	893,340		821,609		71,731
Balance, beginning of period at Dec. 31, 2022	926,880		857,126		69,754
Increase (Decrease) in Partners' Equity [Roll Forward]
Distributions to HEP unitholders	(44,308)		(44,308)
Distributions to noncontrolling interests	(2,549)				(2,549)
Acquisition of remaining UNEV interests	(1,024)		(1,024)
Amortization of restricted and performance units	354		354
Class B unit accretion	(1,024)		(1,024)
Net income	60,297		58,546		1,751
Balance, end of period at Mar. 31, 2023	$ 939,650		$ 870,694		$ 68,956

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Description of Business and Presentation of Financial Statements

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Description of Business and Presentation of Financial Statements

Description of Business and Presentation of Financial Statements

Holly Energy Partners, L.P. (“HEP”), together with its consolidated subsidiaries, is a publicly held master limited partnership. We commenced operations on July 13, 2004, upon the completion of our initial public offering. On March 14, 2022 (the “Closing Date”), HollyFrontier Corporation (“HFC”) and HEP announced the establishment of HF Sinclair Corporation, a Delaware corporation (“HF Sinclair”), as the new parent holding company of HFC and HEP and their subsidiaries, and the completion of their respective acquisitions of Sinclair Oil Corporation (now known as Sinclair Oil LLC (“Sinclair Oil”)) and Sinclair Transportation Company LLC (“Sinclair Transportation”) from REH Company (formerly known as The Sinclair Companies, and referred to herein as “REH Company”). On the Closing Date, pursuant to that certain Business Combination Agreement, dated as of August 2, 2021 (as amended on March 14, 2022, the “Business Combination Agreement”), by and among HFC, HF Sinclair, Hippo Merger Sub, Inc., a wholly owned subsidiary of HF Sinclair (“Parent Merger Sub”), REH Company, and Hippo Holding LLC (now known as Sinclair Holding LLC), a wholly owned subsidiary of REH Company (the “Target Company”), HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly owned subsidiary of HF Sinclair (the “HFC Merger”), and (b) immediately following the HFC Merger, a contribution whereby REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly owned subsidiary of HF Sinclair (together with the HFC Merger, the “HFC Transactions”).

As of March 31, 2023, HF Sinclair and its subsidiaries owned a 47% limited partner interest and the non-economic general partner interest in HEP.

In connection with the closing of the HFC Transactions, HF Sinclair issued 60,230,036 shares of HF Sinclair common stock to REH Company, representing 27% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HFC’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022. References herein to HF Sinclair with respect to time periods prior to March 14, 2022 refer to HFC and its consolidated subsidiaries and do not include the Target Company, Sinclair Transportation or their respective consolidated subsidiaries. References herein to HF Sinclair with respect to time periods from and after March 14, 2022 refer to HF Sinclair and its consolidated subsidiaries, which includes the combined business operations of HFC, the Target Company, Sinclair Transportation and their respective consolidated subsidiaries.

Additionally, on the Closing Date, pursuant to that certain Contribution Agreement, dated August 2, 2021 (as amended on March 14, 2022, the “Contribution Agreement”) by and among REH Company, Sinclair Transportation and HEP, HEP acquired all of the outstanding equity interests of Sinclair Transportation from REH Company in exchange for 21 million newly issued common limited partner units of HEP (the “HEP Units”), representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $329.0 million, inclusive of final working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $678.0 million (the “HEP Transaction” and together with the HFC Transactions, the “Sinclair Transactions”). Of the 21 million HEP Units, 5.29 million units were originally held in escrow to secure REH Company’s renewable identification numbers (“RINs”) credit obligations to HF Sinclair under Section 6.22 of the Business Combination Agreement. The HEP units held in escrow were released to REH Company in April 2023 upon their satisfaction of the RINs credit obligations relating thereto. The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility. The HEP Transaction was conditioned on the closing of the HFC Transactions, which occurred immediately following the HEP Transaction.

Sinclair Transportation, which together with its subsidiaries, owns integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipeline supporting the Target Company refineries and other third party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake.

References herein to HEP with respect to time periods prior to March 14, 2022, include HEP and its consolidated subsidiaries and do not include Sinclair Transportation and its consolidated subsidiaries (collectively, the “Acquired Sinclair Businesses”). References herein to HEP with respect to time periods from and after March 14, 2022 include the operations of the Acquired Sinclair Businesses.

Through our subsidiaries and joint ventures, we own and/or operate petroleum product and crude oil pipelines, terminal, tankage and loading rack facilities and refinery processing units that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States. Additionally, we own (a) a 50% interest in Osage Pipe Line Company, LLC (“Osage”), (b) a 50% interest in Cheyenne Pipeline LLC, (c) a 50% interest in Cushing Connect Pipeline & Terminal LLC, (d) a 25.06% interest in Saddle Butte Pipeline III, LLC and (e) a 49.995% interest in Pioneer Investments Corp. Following the HEP Transaction, we now own the remaining 25% interest in UNEV Pipeline, LLC (“UNEV”) and as a result, UNEV is our wholly owned subsidiary.

We operate in two reportable segments, a Pipelines and Terminals segment and a Refinery Processing Unit segment. Disclosures around these segments are discussed in Note 16.

We generate revenues by charging tariffs for transporting petroleum products and crude oil through our pipelines, by charging fees for terminalling and storing refined products and other hydrocarbons, providing other services at our storage tanks and terminals and by charging a tolling fee per barrel or thousand standard cubic feet of feedstock throughput in our refinery processing units. We do not take ownership of products that we transport, terminal, store or process, and therefore, we are not exposed directly to changes in commodity prices.

The consolidated financial statements included herein have been prepared without audit, pursuant to the rules and regulations of the SEC. The interim financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of our results for the interim periods. Such adjustments are considered to be of a normal recurring nature. Although certain notes and other information required by U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022. Results of operations for interim periods are not necessarily indicative of the results of operations that will be realized for the year ending December 31, 2023.

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. The lease standard (see below) allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components for operating leases under certain conditions. We have made this election for contracts with operating leases. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02. The practical expedient does not apply for sales-type leases. Therefore, we bifurcate the consideration received for those contracts between lease and service components. The service component is accounted for within the scope of ASC 606.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the three months ended March 31, 2023 and 2022, we recognized $4.8 million and $5.2 million, respectively, of these deficiency payments in revenue, of which $0.9 million of the deficiency payments recognized during the three months ended March 31, 2022, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is

accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

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Sinclair Acquisition

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Sinclair Acquisition

Sinclair Acquisition

HEP Transaction

On March 14, 2022, pursuant to the Contribution Agreement, HEP acquired all of the outstanding equity interests of Sinclair Transportation in exchange for 21 million newly issued HEP Units, representing 16.6% of the pro forma outstanding HEP Units with a value of approximately $349 million based on HEP’s fully diluted common limited partner units outstanding and closing unit price on March 11, 2022, and cash consideration equal to $329.0 million, inclusive of final working capital adjustments pursuant to the Contribution Agreement for an aggregate transaction value of $678.0 million. On the same date and immediately following the consummation of the HEP Transaction, pursuant to the Business Combination Agreement, REH Company contributed all of the equity interests of the Target Company to HF Sinclair in exchange for 60,230,036 shares of common stock in HF Sinclair, representing 27% of the pro forma equity of HF Sinclair with a value of approximately $2,149 million based on HF Sinclair’s fully diluted shares of common stock outstanding and closing stock price on March 11, 2022.

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistic Services, L.L.C., the ultimate general partner of HEP (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”), entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, REH Company and the stockholders of REH Company (each a “Unitholder” and collectively, the “Unitholders,” and along with REH Company and each of their permitted transferees, the “REH Parties”), which became effective on the Closing Date.

Pursuant to the Unitholders Agreement, the REH Parties have the right to nominate, and have nominated, one person to the board of directors of HLS until such time that (x) the REH Parties beneficially own less than 10.5 million HEP Units or (y) the HEP Units beneficially owned by the REH Parties constitute less than 5% of all outstanding HEP Units. The Unitholders Agreement also subjects 15.75 million of the HEP Units issued to the REH Parties (the “Restricted Units”) to a “lock-up” period commencing on the Closing Date, during which the REH Parties are prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units were released from such restrictions on the date that was six months after the closing, one-third of the Restricted Units were released from such restrictions on the first anniversary of the Closing Date, and the remainder will be released from such restrictions on the date that is 15 months from the Closing Date.

Under the terms of the Contribution Agreement, HEP acquired Sinclair Transportation, which together with its subsidiaries, owned REH Company’s integrated crude and refined products pipelines and terminal assets, including approximately 1,200 miles of integrated crude and refined product pipelines supporting the REH Company refineries and other third-party refineries, eight product terminals and two crude terminals with approximately 4.5 million barrels of operated storage. In addition, HEP acquired Sinclair Transportation’s interests in three pipeline joint ventures for crude gathering and product offtake including: Saddle Butte Pipeline III, LLC (25.06% non-operated interest); Pioneer Investments Corp. (49.995% non-operated interest); and UNEV (the 25% non-operated interest not already owned by HEP, resulting in UNEV becoming a wholly owned subsidiary of HEP).

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date, with the excess consideration recorded as goodwill. The purchase price allocation resulted in the recognition of $119.1 million in goodwill.

The following tables present the purchase consideration and final purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Working capital adjustment payment by HEP(2)	3,955
Total cash consideration	328,955
Total purchase consideration	$	677,975

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

	(In thousands)
Assets Acquired
Accounts receivable	$	3,005
Prepaid and other current assets	59
Properties and equipment	340,682
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	119,112
Equity method investments	229,891
Total assets acquired	$	696,354
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	14,984
Total liabilities assumed	$	18,379
Net assets acquired	$	677,975

The fair value of properties, plants and equipment was based on the combination of the cost and market approaches. Key assumptions in the cost approach include determining the replacement cost by evaluating recently published data and adjusting replacement cost for physical deterioration, functional and economic obsolescence. We used the market approach to measure the value of certain assets through an analysis of recent sales or offerings of comparable properties.

The fair value of the equity method investments were based on a combination of valuation methods including discounted cash flows and the guideline public company method.

The fair values discussed above were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. See Note 6.

The fair values of all other current receivable and payables were equivalent to their carrying values due to their short-term nature.

For the three months ended March 31, 2023, we incurred $0.5 million in incremental direct acquisition and integration costs that principally relate to legal, advisory and other professional fees and are presented as general and administrative expenses in our statements of operations.

The following unaudited pro forma combined condensed financial data for the three months ended March 31, 2022 was derived from our historical financial statements giving effect to the HEP Transaction as if it had occurred on January 1, 2021. The below information reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including the depreciation of Sinclair Transportation’s fair-valued properties, plants and equipment.

Additionally, pro forma earnings include certain non-recurring charges, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services.

The pro forma results of operations do not include any contract adjustments to tariffs made after closing, cost savings or other synergies that may result from the HEP Transaction. The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

		Three Months Ended March 31, 2022
	(In thousands)
Sales and other revenues		$	134,960
Net income attributable to the partners		$	50,782

Contemporaneous with the closing of the Sinclair Transactions, HEP and HFC amended certain intercompany agreements, including the master throughput agreement, to include within the scope of such agreements certain of the assets acquired by HEP pursuant to the Contribution Agreement.

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Cushing Connect Joint Venture

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Cushing Connect Joint Venture

Cushing Connect Joint Venture

On October 2, 2019, HEP Cushing LLC (“HEP Cushing”), a wholly owned subsidiary of HEP, and Plains Marketing, L.P. (“PMLP”), a wholly owned subsidiary of Plains All American Pipeline, L.P. (“Plains”), formed a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC (the “Cushing Connect Joint Venture”), for (i) the development and construction of a new 160,000 barrel per day common carrier crude oil pipeline (the “Cushing Connect Pipeline”) that connected the Cushing, Oklahoma crude oil hub to the Tulsa, Oklahoma refining complex owned by a subsidiary of HF Sinclair and (ii) the ownership and operation of 1.5 million barrels of crude oil storage in Cushing, Oklahoma (the “Cushing Connect JV Terminal”). The Cushing Connect JV Terminal went in service during the second quarter of 2020, and the Cushing Connect Pipeline was placed into service during the third quarter of 2021. Long-term commercial agreements have been entered into to support the Cushing Connect Joint Venture assets. The Cushing Connect Joint Venture has contracted with an affiliate of HEP to manage the operation of the Cushing Connect Pipeline and with an affiliate of Plains to manage the operation of the Cushing Connect JV Terminal.

The Cushing Connect Joint Venture legal entities are variable interest entities (“VIEs”) as defined under GAAP. A legal entity is a VIE if it has any one of the following characteristics: (i) the entity does not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support; (ii) the at risk equity holders, as a group, lack the

characteristics of a controlling financial interest; or (iii) the entity is structured with non-substantive voting rights. The Cushing Connect Joint Venture legal entities do not have sufficient equity at risk to finance their activities without additional financial support. Since HEP constructed and is operating the Cushing Connect Pipeline, HEP has more ability to direct the activities that most significantly impact the financial performance of the Cushing Connect Joint Venture and Cushing Connect Pipeline legal entities. Therefore, HEP consolidates those legal entities. We do not have the ability to direct the activities that most significantly impact the Cushing Connect JV Terminal legal entity, and therefore, we account for our interest in the Cushing Connect JV Terminal legal entity using the equity method of accounting. HEP’s maximum exposure to loss as a result of its involvement with the Cushing Connect JV Terminal legal entity is not expected to be material due to the long-term terminalling agreements in place to support its operations.

With the exception of the assets of HEP Cushing, creditors of the Cushing Connect Joint Venture legal entities have no recourse to our assets. Any recourse to HEP Cushing would be limited to the extent of HEP Cushing's assets, which other than its investment in Cushing Connect Joint Venture, are not significant. Furthermore, our creditors have no recourse to the assets of the Cushing Connect Joint Venture legal entities.

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Revenues

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. See Note 1 for further discussion of revenue recognition.

Disaggregated revenues were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Pipelines	$	70,582	$	64,780
Terminals, tanks and loading racks	46,187		37,015
Refinery processing units	26,525		18,403
	$	143,294	$	120,198

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Lease revenues	$	87,377	$	72,914
Service revenues	55,917		47,284
	$	143,294	$	120,198

A contract liability exists when an entity is obligated to perform future services for a customer for which the entity has received consideration. Since HEP may be required to perform future services for these deficiency payments received, the deferred revenues on our balance sheets were considered contract liabilities. A contract asset exists when an entity has a right to consideration in exchange for goods or services transferred to a customer. Our consolidated balance sheets included the contract assets and liabilities in the table below:

	March 31, 2023		December 31, 2022
	(In thousands)
Contract assets	$	8,669	$	6,672
Contract liabilities	$	(3,274)	$	—

The contract assets and liabilities include both lease and service components. During the three months ended March 31, 2022 we recognized $0.9 million of revenue that was previously included in contract liability as of December 31, 2021. During the three months ended March 31, 2023 and 2022, we also recognized $2.1 million and $45 thousand, respectively, of revenue included in contract assets.

As of March 31, 2023, we expect to recognize $2.4 billion in revenue related to our unfulfilled performance obligations under the terms of our long-term throughput agreements and leases expiring in 2024 through 2037. These agreements generally provide for changes in the minimum revenue guarantees annually for increases or decreases in the Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index, with certain contracts having provisions that limit the level of the rate increases or decreases. We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2023	$	295
2024	367
2025	284
2026	268
2027	236
2028	235
Thereafter	690
Total	$	2,375

Payment terms under our contracts with customers are consistent with industry norms and are typically payable within 10 to 30 days of the date of invoice.

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Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 22 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $7.8 million and $7.6 million as of March 31, 2023 and December 31, 2022, respectively, with accumulated depreciation of $4.1 million and $4.0 million as of March 31, 2023 and December 31, 2022, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	March 31, 2023		December 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$	2,078	$	2,317
Current operating lease liabilities	886		968
Noncurrent operating lease liabilities	1,563		1,720
Total operating lease liabilities	$	2,449	$	2,688
Finance leases:
Properties and equipment	$	7,823	$	7,649
Accumulated amortization	(4,107)		(3,979)
Properties and equipment, net	$	3,716	$	3,670
Current finance lease liabilities	$	4,608	$	4,389
Noncurrent finance lease liabilities	61,645		62,513
Total finance lease liabilities	$	66,253	$	66,902
Weighted average remaining lease term (in years):
Operating leases	4.6		4.6
Finance leases	13.6		13.9
Weighted average discount rate:
Operating leases	4.7%		4.6%
Finance leases	5.7%		5.7%

Supplemental cash flow and other information related to leases were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	307	$	276
Operating cash flows on finance leases	$	1,160	$	981
Financing cash flows on finance leases	$	1,012	$	881

Maturities of lease liabilities were as follows:

	March 31, 2023
	Operating		Finance
	(In thousands)
2023	$	684	$	6,032
2024	608		7,597
2025	491		7,138
2026	326		7,258
2027	205		6,511
2028 and thereafter	318		61,038
Total lease payments	2,632		95,574
Less: Imputed interest	(183)		(29,321)
Total lease obligations	2,449		66,253
Less: Current lease liabilities	(886)		(4,608)
Noncurrent lease liabilities	$	1,563	$	61,645

The components of lease expense were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease costs	$	301	$	262
Finance lease costs
Amortization of assets	299		192
Interest on lease liabilities	954		959
Variable lease cost	212		37
Total net lease cost	$	1,766	$	1,450

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy which includes performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the three months ended March 31, 2023, we amended agreements with HF Sinclair related to certain crude tank assets. The amended agreements were treated as lease modifications of previous agreements that met the criteria of sales-type leases. The modified agreements still met the criteria of sales-type leases; therefore, the residual net investment in lease is carried over to the new sales-type lease, and no gain or loss is recognized.

During the three months ended March 31, 2022, we entered into new agreements and modified other agreements with HF Sinclair related to our acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the three months ended March 31, 2022.

The balance sheet impacts were composed of the following:

	Three Months Ended March 31, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

These sales-type lease transactions were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease revenues	$	82,798	$	69,975
Direct financing lease interest income	537		520
Sales-type lease interest income	19,864		12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	4,579		2,939

For our sales-type leases, we bifurcate customer obligations between lease and service components. We included the lease portion of customer obligations related to minimum volume requirements in guaranteed minimum lease payments. The lease portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized the lease portion of any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2023:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2023	$	222,303	$	1,676	$	62,996
2024	270,998		2,226		82,478
2025	195,194		2,244		80,479
2026	181,204		2,262		80,479
2027	148,739		2,280		80,479
2028 and thereafter	522,446		34,940		681,221
Total lease receipt payments	$	1,540,884	$	45,628	$	1,068,132
Less: Imputed interest			(29,394)		(944,047)
			16,234		124,085
Unguaranteed residual assets at end of leases			—		390,331
Net investment in leases			$	16,234	$	514,416

Net investments in leases recorded on our balance sheet were composed of the following:

	March 31, 2023				December 31, 2022
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	411,077	$	16,234	$	418,989	$	16,264
Unguaranteed residual assets	103,339		—		110,466		—
Net investment in leases	$	514,416	$	16,234	$	529,455	$	16,264

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 22 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $7.8 million and $7.6 million as of March 31, 2023 and December 31, 2022, respectively, with accumulated depreciation of $4.1 million and $4.0 million as of March 31, 2023 and December 31, 2022, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	March 31, 2023		December 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$	2,078	$	2,317
Current operating lease liabilities	886		968
Noncurrent operating lease liabilities	1,563		1,720
Total operating lease liabilities	$	2,449	$	2,688
Finance leases:
Properties and equipment	$	7,823	$	7,649
Accumulated amortization	(4,107)		(3,979)
Properties and equipment, net	$	3,716	$	3,670
Current finance lease liabilities	$	4,608	$	4,389
Noncurrent finance lease liabilities	61,645		62,513
Total finance lease liabilities	$	66,253	$	66,902
Weighted average remaining lease term (in years):
Operating leases	4.6		4.6
Finance leases	13.6		13.9
Weighted average discount rate:
Operating leases	4.7%		4.6%
Finance leases	5.7%		5.7%

Supplemental cash flow and other information related to leases were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	307	$	276
Operating cash flows on finance leases	$	1,160	$	981
Financing cash flows on finance leases	$	1,012	$	881

Maturities of lease liabilities were as follows:

	March 31, 2023
	Operating		Finance
	(In thousands)
2023	$	684	$	6,032
2024	608		7,597
2025	491		7,138
2026	326		7,258
2027	205		6,511
2028 and thereafter	318		61,038
Total lease payments	2,632		95,574
Less: Imputed interest	(183)		(29,321)
Total lease obligations	2,449		66,253
Less: Current lease liabilities	(886)		(4,608)
Noncurrent lease liabilities	$	1,563	$	61,645

The components of lease expense were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease costs	$	301	$	262
Finance lease costs
Amortization of assets	299		192
Interest on lease liabilities	954		959
Variable lease cost	212		37
Total net lease cost	$	1,766	$	1,450

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy which includes performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the three months ended March 31, 2023, we amended agreements with HF Sinclair related to certain crude tank assets. The amended agreements were treated as lease modifications of previous agreements that met the criteria of sales-type leases. The modified agreements still met the criteria of sales-type leases; therefore, the residual net investment in lease is carried over to the new sales-type lease, and no gain or loss is recognized.

During the three months ended March 31, 2022, we entered into new agreements and modified other agreements with HF Sinclair related to our acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the three months ended March 31, 2022.

The balance sheet impacts were composed of the following:

	Three Months Ended March 31, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

These sales-type lease transactions were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease revenues	$	82,798	$	69,975
Direct financing lease interest income	537		520
Sales-type lease interest income	19,864		12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	4,579		2,939

For our sales-type leases, we bifurcate customer obligations between lease and service components. We included the lease portion of customer obligations related to minimum volume requirements in guaranteed minimum lease payments. The lease portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized the lease portion of any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2023:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2023	$	222,303	$	1,676	$	62,996
2024	270,998		2,226		82,478
2025	195,194		2,244		80,479
2026	181,204		2,262		80,479
2027	148,739		2,280		80,479
2028 and thereafter	522,446		34,940		681,221
Total lease receipt payments	$	1,540,884	$	45,628	$	1,068,132
Less: Imputed interest			(29,394)		(944,047)
			16,234		124,085
Unguaranteed residual assets at end of leases			—		390,331
Net investment in leases			$	16,234	$	514,416

Net investments in leases recorded on our balance sheet were composed of the following:

	March 31, 2023				December 31, 2022
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	411,077	$	16,234	$	418,989	$	16,264
Unguaranteed residual assets	103,339		—		110,466		—
Net investment in leases	$	514,416	$	16,234	$	529,455	$	16,264

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

Leases

Leases

See Note 1 for further discussion of lease accounting.

Lessee Accounting

As a lessee, we lease land, buildings, pipelines, transportation and other equipment to support our operations. These leases can be categorized into operating and finance leases.

Our leases have remaining terms of less than 1 year to 22 years, some of which include options to extend the leases for up to 10 years.

Finance Lease Obligations

We have finance lease obligations related to vehicle leases with initial terms of 33 to 48 months. The total cost of assets under finance leases was $7.8 million and $7.6 million as of March 31, 2023 and December 31, 2022, respectively, with accumulated depreciation of $4.1 million and $4.0 million as of March 31, 2023 and December 31, 2022, respectively. We include depreciation of finance leases in depreciation and amortization in our consolidated statements of income.

In addition, we have a finance lease obligation related to a pipeline lease with an initial term of 10 years with one remaining subsequent renewal option for an additional 10 years.

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	March 31, 2023		December 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$	2,078	$	2,317
Current operating lease liabilities	886		968
Noncurrent operating lease liabilities	1,563		1,720
Total operating lease liabilities	$	2,449	$	2,688
Finance leases:
Properties and equipment	$	7,823	$	7,649
Accumulated amortization	(4,107)		(3,979)
Properties and equipment, net	$	3,716	$	3,670
Current finance lease liabilities	$	4,608	$	4,389
Noncurrent finance lease liabilities	61,645		62,513
Total finance lease liabilities	$	66,253	$	66,902
Weighted average remaining lease term (in years):
Operating leases	4.6		4.6
Finance leases	13.6		13.9
Weighted average discount rate:
Operating leases	4.7%		4.6%
Finance leases	5.7%		5.7%

Supplemental cash flow and other information related to leases were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	307	$	276
Operating cash flows on finance leases	$	1,160	$	981
Financing cash flows on finance leases	$	1,012	$	881

Maturities of lease liabilities were as follows:

	March 31, 2023
	Operating		Finance
	(In thousands)
2023	$	684	$	6,032
2024	608		7,597
2025	491		7,138
2026	326		7,258
2027	205		6,511
2028 and thereafter	318		61,038
Total lease payments	2,632		95,574
Less: Imputed interest	(183)		(29,321)
Total lease obligations	2,449		66,253
Less: Current lease liabilities	(886)		(4,608)
Noncurrent lease liabilities	$	1,563	$	61,645

The components of lease expense were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease costs	$	301	$	262
Finance lease costs
Amortization of assets	299		192
Interest on lease liabilities	954		959
Variable lease cost	212		37
Total net lease cost	$	1,766	$	1,450

Lessor Accounting

As discussed in Note 1, the majority of our contracts with customers meet the definition of a lease.

Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and we believe these assets will continue to have value when the current agreements expire due to our risk management strategy which includes performing ongoing maintenance during the lease term. HF Sinclair generally has the option to purchase assets located within HF Sinclair refinery boundaries, including refinery tankage, truck racks and refinery processing units, at fair market value when the related agreements expire.

During the three months ended March 31, 2023, we amended agreements with HF Sinclair related to certain crude tank assets. The amended agreements were treated as lease modifications of previous agreements that met the criteria of sales-type leases. The modified agreements still met the criteria of sales-type leases; therefore, the residual net investment in lease is carried over to the new sales-type lease, and no gain or loss is recognized.

During the three months ended March 31, 2022, we entered into new agreements and modified other agreements with HF Sinclair related to our acquired Sinclair Transportation assets. Certain of these agreements met the criteria of sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Because we recorded these assets at fair values under purchase price accounting, there was no gain or loss on these sales-type leases during the three months ended March 31, 2022.

The balance sheet impacts were composed of the following:

	Three Months Ended March 31, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

These sales-type lease transactions were non-cash transactions.

Lease income recognized was as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease revenues	$	82,798	$	69,975
Direct financing lease interest income	537		520
Sales-type lease interest income	19,864		12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	4,579		2,939

For our sales-type leases, we bifurcate customer obligations between lease and service components. We included the lease portion of customer obligations related to minimum volume requirements in guaranteed minimum lease payments. The lease portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. We recognized the lease portion of any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues.

Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2023:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2023	$	222,303	$	1,676	$	62,996
2024	270,998		2,226		82,478
2025	195,194		2,244		80,479
2026	181,204		2,262		80,479
2027	148,739		2,280		80,479
2028 and thereafter	522,446		34,940		681,221
Total lease receipt payments	$	1,540,884	$	45,628	$	1,068,132
Less: Imputed interest			(29,394)		(944,047)
			16,234		124,085
Unguaranteed residual assets at end of leases			—		390,331
Net investment in leases			$	16,234	$	514,416

Net investments in leases recorded on our balance sheet were composed of the following:

	March 31, 2023				December 31, 2022
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	411,077	$	16,234	$	418,989	$	16,264
Unguaranteed residual assets	103,339		—		110,466		—
Net investment in leases	$	514,416	$	16,234	$	529,455	$	16,264

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments. Debt consists of outstanding principal under our revolving credit agreement (which approximates fair value as interest rates are reset frequently at current interest rates) and our fixed interest rate senior notes.

The carrying amounts and estimated fair values of our senior notes were as follows:

		March 31, 2023				December 31, 2022
Financial Instrument	Fair Value Input Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	$	494,305	$	468,380	$	494,047	$	458,090
6.375% Senior Notes	Level 2	394,580		398,480		394,287		394,568
Total Liabilities		$	888,885	$	866,860	$	888,334	$	852,658

Level 2 Financial Instruments

Our senior notes are measured at fair value using Level 2 inputs. The fair value of the senior notes is based on market values provided by a third-party bank, which were derived using market quotes for similar type debt instruments. See Note 10 for additional information.

Non-Recurring Fair Value Measurements

The HEP Transaction was accounted for as a business combination using the acquisition method of accounting, with the assets acquired and liabilities assumed at their respective acquisition date fair values at the Closing Date. The fair value measurements were based on a combination of valuation methods including discounted cash flows, the guideline public company method, the market approach and obsolescence adjusted replacement costs, all of which are Level 3 inputs.

For the net investments in sales-type leases recognized during the three months ended March 31, 2022, the estimated fair value of the underlying leased assets at contract inception and the present value of the estimated unguaranteed residual asset at the end of the lease term are used in determining the net investment in leases recorded. The asset valuation estimates include Level 3 inputs based on a replacement cost valuation method.

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Properties and Equipment

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Properties and Equipment

Properties and Equipment 

The carrying amounts of our properties and equipment were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Pipelines, terminals and tankage	$	1,584,825	$	1,567,359
Refinery assets	353,998		353,998
Land and right of way	171,368		171,327
Construction in progress	21,917		23,027
Other	69,550		69,098
	2,201,658		2,184,809
Less accumulated depreciation	(815,698)		(795,921)
	$	1,385,960	$	1,388,888

Depreciation expense was $20.2 million and $18.5 million for the three months ended March 31, 2023 and 2022, respectively, and includes depreciation of assets acquired under capital leases.

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Intangible Assets

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

Intangible assets include transportation agreements and customer relationships that represent a portion of the total purchase price of certain assets acquired from Delek US Holdings, Inc. (“Delek”) in 2005, from HFC in 2008 prior to HEP becoming a consolidated VIE of HFC, from Plains in 2017, and from other minor acquisitions in 2018.

The carrying amounts of our intangible assets were as follows:

	Useful Life	March 31, 2023		December 31, 2022
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(148,586)		(145,497)
		$	56,211	$	59,300

Amortization expense was $3.1 million and $3.5 million for the three months ended March 31, 2023 and 2022, respectively. We estimate amortization expense to be $9.1 million for 2024 through 2027, and $9.0 million for 2028.

We have additional transportation agreements with subsidiaries of HF Sinclair resulting from historical transactions consisting of pipeline, terminal and tankage assets contributed to us or acquired from subsidiaries of HF Sinclair. These transactions occurred while we were a consolidated variable interest entity of HF Sinclair; therefore, our basis in these agreements is zero and does not reflect a step-up in basis to fair value.

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Employees, Retirement and Incentive Plans

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Employees, Retirement and Incentive Plans

Employees, Retirement and Incentive Plans

Direct support for our operations is provided by HLS, which utilizes personnel employed by HF Sinclair who are dedicated to performing services for us. Their costs, including salaries, bonuses, payroll taxes, benefits and other direct costs, are charged to us monthly in accordance with an omnibus agreement we have with HF Sinclair (the “Omnibus Agreement”). These employees participate in the retirement and benefit plans of HF Sinclair. Our share of retirement and benefit plan costs was $3.0 million and $2.4 million for the three months ended March 31, 2023 and 2022, respectively.

Under HLS’s secondment agreement with HF Sinclair (the “Secondment Agreement”), certain employees of HF Sinclair are seconded to HLS to provide operational and maintenance services for certain of our processing, refining, pipeline and tankage assets, and HLS reimburses HF Sinclair for its prorated portion of the wages, benefits, and other costs related to these employees.

We have a Long-Term Incentive Plan for employees and non-employee directors who perform services for us. The Long-Term Incentive Plan consists of five components: restricted or phantom units, performance units, unit options, unit appreciation rights and cash awards. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (a significant proportion of our awards) is to expense the costs ratably over the vesting periods.

As of March 31, 2023, we had two types of unit-based awards outstanding, which are described below. The compensation cost charged against income was $0.4 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. We currently purchase units in the open market instead of issuing new units for settlement of all unit awards under our Long-Term Incentive Plan. As of March 31, 2023, 2,500,000 units were authorized to be granted under our Long-Term Incentive Plan, of which 771,313 were available to be granted, assuming no forfeitures of the unvested units and full achievement of goals for the unvested performance units.

Phantom Units

Under our Long-Term Incentive Plan, we grant phantom units to our non-employee directors and selected employees who perform services for us, with most awards vesting over a period of one to three years. Although full ownership of the units does not transfer to the recipients until the units vest, the recipients have distribution rights on these units from the date of grant.

The fair value of each phantom unit award is measured at the market price as of the date of grant and is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A summary of phantom unit activity and changes during the three months ended March 31, 2023, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2023 (nonvested)	115,809	$	16.66
Granted	1,479	18.49
Vesting and transfer of full ownership to recipients	(330)	11.92
Forfeited	(804)	11.92
Outstanding at March 31, 2023 (nonvested)	116,154	16.73

The grant date fair values of phantom units that were vested and transferred to recipients during the three months ended March 31, 2023 and 2022 was $4 thousand and $39 thousand, respectively. As of March 31, 2023, $1.1 million of total unrecognized compensation expense related to unvested phantom unit grants is expected to be recognized over a weighted-average period of 1.1 years.

Performance Units

Under our Long-Term Incentive Plan, we grant performance units to selected officers who perform services for us. Performance units granted are payable in common units at the end of a three-year performance period based upon meeting certain criteria over the performance period. Under the terms of our performance unit grants, some awards are subject to the growth in our distributable cash flow per common unit over the performance period while other awards are subject to "financial performance" and "market performance." Financial performance is based on meeting certain earnings before interest, taxes, depreciation and amortization ("EBITDA") targets, while market performance is based on the relative standing of total unitholder return achieved by HEP compared to peer group companies. The number of units ultimately issued under these awards can range from 0% to 200%.

Although common units are not transferred to the recipients until the performance units vest, the recipients have distribution rights with respect to the target number of performance units subject to the award from the date of grant at the same rate as distributions paid on our common units.

A summary of performance unit activity and changes for the three months ended March 31, 2023, is presented below:

Performance Units	Units
Outstanding at January 1, 2023 (nonvested)	42,852
Granted	513
Outstanding at March 31, 2023 (nonvested)	43,365

The grant date fair value of performance units vested and transferred to recipients during the three months ended March 31, 2022 was $0.6 million. Based on the weighted-average fair value of performance units outstanding at March 31, 2023, of $0.7 million, there was $0.5 million of total unrecognized compensation expense related to nonvested performance units, which is expected to be recognized over a weighted-average period of 1.4 years.

During the three months ended March 31, 2023, we did not purchase any common units in the open market for the issuance and settlement of unit awards under our Long-Term Incentive Plan.

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Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

Debt

Credit Agreement

We have a $1.2 billion senior secured revolving credit facility (the “Credit Agreement”) that matures in July 2025. The Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments, working capital and for general partnership purposes. The Credit Agreement is also available to fund letters of credit up to a $50 million sub-limit and continues to provide for an accordion feature that allows us to increase commitments under the Credit Agreement up to a maximum amount of $1.7 billion.

Our obligations under the Credit Agreement are collateralized by substantially all of our assets, and indebtedness under the Credit Agreement is guaranteed by our material, wholly owned subsidiaries. The Credit Agreement requires us to maintain compliance with certain financial covenants consisting of total leverage, senior secured leverage, and interest coverage. It also limits or restricts our ability to engage in certain activities. If, at any time prior to the maturity of the Credit Agreement, HEP obtains two investment grade credit ratings, the Credit Agreement will become unsecured and many of the covenants, limitations, and restrictions will be eliminated.

We may prepay all loans at any time without penalty, except for tranche breakage costs. If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of all loans outstanding and exercise other rights and remedies. We were in compliance with the covenants under the Credit Agreement as of March 31, 2023.

Senior Notes

On April 8, 2022, we closed a private placement of $400 million in aggregate principal amount of 6.375% senior unsecured notes due in 2027 (the “6.375% Senior Notes”). The 6.375% Senior Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The total net proceeds from the offering of the 6.375% Senior Notes were used to partially repay outstanding borrowings under the Credit Agreement, increasing our available liquidity.

As of March 31, 2023, we had $500 million aggregate principal amount of 5% senior unsecured notes due in 2028 (the “5% Senior Notes,” and together with the 6.375% Senior Notes, the “Senior Notes”).

The Senior Notes are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the Senior Notes are rated investment grade by either Moody’s or Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights at varying premiums over face value under the Senior Notes.

Indebtedness under the Senior Notes is guaranteed by all of our existing wholly owned subsidiaries (other than Holly Energy Finance Corp. and certain immaterial subsidiaries).

Long-term Debt

The carrying amounts of our long-term debt were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Credit Agreement
Amount outstanding	$	651,500	$	668,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(5,695)		(5,953)
	494,305		494,047
6.375% Senior Notes
Principal	400,000		400,000
Unamortized premium and debt issuance costs	(5,420)		(5,713)
	394,580		394,287
Total long-term debt	$	1,540,385	$	1,556,334

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Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

We serve many of HF Sinclair’s refinery and renewable diesel facilities under long-term pipeline, terminal and tankage throughput agreements, and refinery processing unit tolling agreements expiring from 2024 to 2037, and revenues from these agreements accounted for approximately 82% of our total revenues for the three months ended March 31, 2023. Under these agreements, HF Sinclair agrees to transport, store and process throughput volumes of refined product, crude oil and feedstocks on our pipelines, terminals, tankage, loading rack facilities and refinery processing units that result in minimum annual payments to us. These minimum annual payments or revenues are generally subject to annual rate adjustments on July 1st each year based on increases or decreases in PPI or the FERC index. As of March 31, 2023, these agreements with HF Sinclair require minimum annualized payments to us of $456.6 million.

If HF Sinclair fails to meet its minimum volume commitments under the agreements in any quarter, it will be required to pay us the amount of any shortfall in cash by the last day of the month following the end of the quarter. Under certain of these agreements, a shortfall payment may be applied as a credit in the following four quarters after its minimum obligations are met.

Under certain provisions of the Omnibus Agreement, we pay HF Sinclair an annual administrative fee (currently $5.0 million) for the provision by HF Sinclair or its affiliates of various general and administrative services to us. This fee does not include the salaries of personnel employed by HF Sinclair who perform services for us on behalf of HLS or the cost of their employee benefits, which are charged to us separately by HF Sinclair. Also, we reimburse HF Sinclair and its affiliates for direct expenses they incur on our behalf.

Related party transactions with HF Sinclair and its subsidiaries were as follows:

•Revenues received from HF Sinclair were $116.9 million and $92.3 million for the three months ended March 31, 2023 and 2022, respectively.

•HF Sinclair charged us general and administrative services under the Omnibus Agreement of $1.3 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively.

•We reimbursed HF Sinclair for costs of employees supporting our operations of $20.6 million and $16.1 million for the three months ended March 31, 2023 and 2022, respectively.

•HF Sinclair reimbursed us $1.3 million and $3.1 million for the three months ended March 31, 2023 and 2022, for expense and capital projects, respectively.

•We distributed $20.9 million in both the three months ended March 31, 2023 and 2022, to HF Sinclair as regular distributions on its common units.

•Accounts receivable from HF Sinclair were $71.3 million and $63.5 million at March 31, 2023, and December 31, 2022, respectively.

•Accounts payable to HF Sinclair were $9.9 million and $15.8 million at March 31, 2023, and December 31, 2022, respectively.

•Deferred revenue in the consolidated balance sheets included at March 31, 2023 includes $3.3 million relating to certain shortfall billings to HF Sinclair.

•We received direct financing lease payments from HF Sinclair for use of our Artesia and Tulsa rail yards of $0.6 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively.

•We received sales-type lease payments of $20.6 million and $12.6 million from HF Sinclair for the three months ended March 31, 2023 and 2022, respectively.

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Partners' Equity, Income Allocations and Cash Distributions

3 Months Ended

Mar. 31, 2023

Partners' Capital [Abstract]

Partners' Equity, Income Allocations and Cash Distributions

Partners’ Equity, Income Allocations and Cash Distributions

As of March 31, 2023, HF Sinclair held 59,630,030 of our common units, constituting a 47% limited partner interest in us, and held the non-economic general partner interest.

Continuous Offering Program

We have a continuous offering program under which we may issue and sell common units from time to time, representing limited partner interests, up to an aggregate gross sales amount of $200 million. As of March 31, 2023, HEP has issued 2,413,153 units under this program, providing $82.3 million in gross proceeds, but no units have been issued under this program during the periods presented.

Allocations of Net Income

Net income attributable to HEP is allocated to the partners based on their weighted-average ownership percentage during the period.

Cash Distributions

On April 20, 2023, we announced our cash distribution for the first quarter of 2023 of $0.35 per unit. The distribution is payable on all common units and will be paid May 11, 2023, to all unitholders of record on May 1, 2023.

Our regular quarterly cash distribution to the limited partners will be $44.3 million for the three months ended March 31, 2023 and was $44.3 million for the three months ended March 31, 2022. Our distributions are declared subsequent to quarter end; therefore, these amounts do not reflect distributions paid during the respective period.

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Net Income Per Limited Partner Unit

3 Months Ended

Mar. 31, 2023

Net Income per Limited Partner Unit [Abstract]

Net Income Per Limited Partner Unit

Net Income Per Limited Partner Unit

Basic net income per unit applicable to the limited partners is calculated as net income attributable to the partners, adjusted for participating securities’ share in earnings, divided by the weighted average limited partners’ units outstanding. Diluted net income per unit assumes, when dilutive, the issuance of the net incremental units from phantom units and performance units. To the extent net income attributable to the partners exceeds or is less than cash distributions, this difference is allocated to the partners based on their weighted-average ownership percentage during the period. Our dilutive securities are immaterial for all periods presented.

Net income per limited partner unit is computed as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands, except per unit data)
Net income attributable to the partners	$	57,522	$	49,559
Less: Participating securities’ share in earnings	(73)		(111)
Net income attributable to common units	57,449		49,448
Weighted average limited partners’ units outstanding	126,440		109,640
Limited partners’ per unit interest in earnings - basic and diluted	$	0.45	$	0.45

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Environmental

3 Months Ended

Mar. 31, 2023

Environmental Remediation Obligations [Abstract]

Environmental

Environmental

We expensed $0.4 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively, for environmental remediation obligations. The accrued environmental liability, net of expected recoveries from indemnifying parties, reflected in our consolidated balance sheets was $19.8 million and $19.5 million at March 31, 2023 and December 31, 2022, of which $17.8 million and $17.5 million was classified as other long-term liabilities for March 31, 2023 and December 31, 2022, respectively. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time.

Under the Omnibus Agreement and certain transportation agreements and purchase agreements with HF Sinclair and/or its subsidiaries, HF Sinclair has agreed to indemnify us, subject to certain monetary and time limitations, for environmental noncompliance and remediation liabilities associated with certain assets transferred to us from HF Sinclair and its subsidiaries and occurring or existing prior to the date of such transfers.

See Note 18 for a discussion of our share of incurred and accrued environmental remediation and recovery expenses associated with the release of crude oil on the Osage pipeline reflected in our equity in earnings of equity method investments.

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Contingencies	3 Months Ended
	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Contingencies	ContingenciesWe are a party to various legal and regulatory proceedings, none of which we believe will have a material adverse impact on our financial condition, results of operations or cash flows.

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Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segment Information

Segment InformationAlthough financial information is reviewed by our chief operating decision makers from a variety of perspectives, they view the business in two reportable operating segments: (1) pipelines and terminals, and (2) refinery processing units. These operating segments adhere to the accounting polices used for our consolidated financial statements. For a discussion of these accounting policies and a summary of our derivation of revenue, see Note 1.

Our pipelines and terminals segment includes our petroleum product and crude pipelines and terminal, tankage and loading rack facilities that support refining and marketing operations of HF Sinclair and other refineries in the Mid-Continent, Southwest and Northwest regions of the United States.

Our Refinery Processing Unit segment consists of five refinery processing units at two of HF Sinclair's refining facility locations.

Pipelines and terminals have been aggregated as one reportable segment as both pipelines and terminals (1) have similar economic characteristics, (2) similarly provide logistics services of transportation and storage of petroleum products, (3) similarly support the petroleum refining business, including distribution of its products, (4) have principally the same customers and (5) are subject to similar regulatory requirements.

We evaluate the performance of each segment based on its respective operating income. Certain general and administrative expenses and interest and financing costs are excluded from segment operating income as they are not directly attributable to a specific reportable segment. Identifiable assets are those used by the segment, whereas other assets are principally equity method investments, cash, deposits and other assets that are not associated with a specific reportable segment.

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	90,353	$	73,851
Pipelines and terminals - third-party	26,416		27,944
Refinery processing units - affiliate	26,525		18,403
Total segment revenues	$	143,294	$	120,198
Segment operating income:
Pipelines and terminals	$	55,053	$	49,804
Refinery processing units	11,436		5,582
Total segment operating income	66,489		55,386
Unallocated general and administrative expenses	(4,635)		(4,312)
Interest expense	(25,978)		(13,639)
Interest income	20,400		12,647
Equity in earnings of equity method investments	3,882		3,626
Gain on sale of assets and other	173		101
Income before income taxes	$	60,331	$	53,809
Capital Expenditures:
Pipelines and terminals	$	7,614	$	10,421
Refinery processing units	—		3,726
Total capital expenditures	$	7,614	$	14,147

	March 31, 2023		December 31, 2022
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	2,134,453	$	2,152,159
Refinery processing units	302,280		304,332
Other	296,367		291,011
Total identifiable assets	$	2,733,100	$	2,747,502

(1) Included goodwill of $342.8 million as of March 31, 2023 and December 31, 2022, respectively.

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Supplemental Guarantor / Non-Guarantor Financial Information

3 Months Ended

Mar. 31, 2023

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Supplemental Guarantor / Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary's guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the Senior Notes have been satisfied.

The following financial information presents condensed consolidating balance sheets and statements of income of the Parent, the Guarantor Subsidiaries and the Non-Guarantor subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting.

As a result of the HEP Transaction, UNEV became a 100% owned subsidiary, and it was subsequently added as a guarantor of the obligations of HEP under the Senior Notes during the second quarter of 2022. UNEV financial information has been included in the Guarantor Subsidiaries financial information for all periods presented.

Condensed Consolidating Balance Sheet

March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,245	$	(1,130)	$	990	$	—	$	7,105
Accounts receivable	—		86,658		1,414		(1,342)		86,730
Prepaid and other current assets	462		11,472		370		(370)		11,934
Total current assets	7,707		97,000		2,774		(1,712)		105,769
Properties and equipment, net	—		1,385,960		—		—		1,385,960
Operating lease right-of-use assets	—		2,078		—		—		2,078
Net investment in leases	—		524,564		101,954		(101,954)		524,564
Investment in subsidiaries	2,428,056		68,956		—		(2,497,012)		—
Intangible assets, net	—		56,211		—		—		56,211
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		240,007		34,135		—		274,142
Deferred turnaround costs	—		23,363		—		—		23,363
Other assets	5,420		12,831		—		—		18,251
Total assets	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,050	$	396	$	(1,342)	$	28,104
Accrued interest	17,567		—		—		—		17,567
Deferred revenue	—		15,316		—		—		15,316
Accrued property taxes	—		7,101		—		—		7,101
Current operating lease liabilities	—		886		—		—		886
Current finance lease liabilities	—		6,867		—		(2,259)		4,608
Other current liabilities	439		2,054		555		—		3,048
Total current liabilities	18,006		61,274		951		(3,601)		76,630
Long-term debt	1,540,385		—		—		—		1,540,385
Noncurrent operating lease liabilities	—		1,563		—		—		1,563
Noncurrent finance lease liabilities	—		149,828		—		(88,183)		61,645
Other long-term liabilities	216		29,517		—		—		29,733
Deferred revenue	—		21,963		—		—		21,963
Class B unit	—		61,531		—		—		61,531
Equity - partners	882,576		2,428,056		68,956		(2,508,894)		870,694
Equity - noncontrolling interests	—		—		68,956		—		68,956
Total liabilities and equity	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100

Condensed Consolidating Balance Sheet

December 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,316	$	4,454	$	2,147	$	—	$	10,917
Accounts receivable	—		79,689		1,453		(1,339)		79,803
Prepaid and other current assets	256		12,141		356		(356)		12,397
Total current assets	4,572		96,284		3,956		(1,695)		103,117
Properties and equipment, net	—		1,388,888		—		—		1,388,888
Operating lease right-of-use assets	—		2,317		—		—		2,317
Net investment in leases	—		539,705		101,871		(101,871)		539,705
Investment in subsidiaries	2,432,767		69,754		—		(2,502,521)		—
Intangible assets, net	—		59,300		—		—		59,300
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		235,858		34,746		—		270,604
Deferred turnaround costs	—		24,154		—		—		24,154
Other assets	5,865		10,790		—		—		16,655
Total assets	$	2,443,204	$	2,769,812	$	140,573	$	(2,606,087)	$	2,747,502
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	43,303	$	545	$	(1,339)	$	42,509
Accrued interest	17,992		—		—		—		17,992
Deferred revenue	—		12,087		—		—		12,087
Accrued property taxes	—		5,449		—		—		5,449
Current operating lease liabilities	—		968		—		—		968
Current finance lease liabilities	—		6,560		—		(2,171)		4,389
Other current liabilities	117		1,793		520		—		2,430
Total current liabilities	18,109		70,160		1,065		(3,510)		85,824
Long-term debt	1,556,334		—		—		—		1,556,334
Noncurrent operating lease liabilities	—		1,720		—		—		1,720
Noncurrent finance lease liabilities	—		150,935		—		(88,422)		62,513
Other long-term liabilities	—		29,111		—		—		29,111
Deferred revenue	—		24,613		—		—		24,613
Class B unit	—		60,507		—		—		60,507
Equity - partners	868,760		2,432,767		69,754		(2,514,155)		857,126
Equity - noncontrolling interests	—		—		69,754		—		69,754
Total liabilities and equity	$	2,443,203	$	2,769,813	$	140,573	$	(2,606,087)	$	2,747,502

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	116,878	$	—	$	—	$	116,878
Third parties	—		26,416		—		—		26,416
	—		143,294		—		—		143,294
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		50,822		1,320		—		52,142
Depreciation and amortization	—		24,663		—		—		24,663
General and administrative	1,482		3,153		—		—		4,635
	1,482		78,638		1,320		—		81,440
Operating income (loss)	(1,482)		64,656		(1,320)		—		61,854
Other income (expense):
Equity in earnings of subsidiaries	84,028		1,752		—		(85,780)		—
Equity in earnings of equity method investments	—		3,173		709		—		3,882
Interest expense	(25,024)		(5,069)		—		4,115		(25,978)
Interest income	—		20,400		4,115		(4,115)		20,400
Gain on sale of assets and other	—		173		—		—		173
	59,004		20,429		4,824		(85,780)		(1,523)
Income before income taxes	57,522		85,085		3,504		(85,780)		60,331
State income tax expense	—		(34)		—		—		(34)
Net income	57,522		85,051		3,504		(85,780)		60,297
Allocation of net income attributable to noncontrolling interests	—		(1,023)		(1,752)		—		(2,775)
Net income attributable to the partners	$	57,522	$	84,028	$	1,752	$	(85,780)	$	57,522

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	92,254	$	—	$	—	$	92,254
Third parties	—		27,944		—		—		27,944
	—		120,198		—		—		120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,934		691		—		42,625
Depreciation and amortization	—		22,187		—		—		22,187
General and administrative	1,088		3,224		—		—		4,312
	1,088		67,345		691		—		69,124
Operating income (loss)	(1,088)		52,853		(691)		—		51,074
Other income (expense):
Equity in earnings of subsidiaries	63,327		2,171		—		(65,498)		—
Equity in earnings of equity method investments	—		2,720		906		—		3,626
Interest expense	(12,680)		(5,086)		—		4,127		(13,639)
Interest income	—		12,647		4,127		(4,127)		12,647
Gain on sale of assets and other	—		101		—		—		101
	50,647		12,553		5,033		(65,498)		2,735
Income before income taxes	49,559		65,406		4,342		(65,498)		53,809
State income tax expense	—		(31)		—		—		(31)
Net income	49,559		65,375		4,342		(65,498)		53,778
Allocation of net income attributable to noncontrolling interests	—		(2,048)		(2,171)		—		(4,219)
Net income attributable to the partners	$	49,559	$	63,327	$	2,171	$	(65,498)	$	49,559

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Osage Pipeline	3 Months Ended
	Mar. 31, 2023
Unusual or Infrequent Items, or Both [Abstract]
Osage Pipeline	Osage PipelineOn July 8, 2022, the Osage pipeline, which is owned by Osage (see Note 1) and carries crude oil from Cushing, Oklahoma to El Dorado, Kansas, suffered a release of crude oil. Our equity in earnings of equity method investments was reduced in the three months ended March 31, 2023 by $0.9 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release. From the date of the release through March 31, 2023, our equity in earnings of equity method investments was reduced by $18.5 million for our 50% share of incurred and estimated environmental remediation and recovery expenses associated with the release, net of our share of insurance proceeds received to date is $3.0 million. Any additional insurance recoveries will be recorded as they are received. If the Osage insurance policy pays out in full, our share of the remaining insurance coverage is expected to be $10.0 million. As Osage is an equity method investment, its financial position and results are not consolidated into HEP financial statement line items. The financial impact of the Osage crude oil release is reflected on the consolidated balance sheets as a reduction in equity method investments and is reflected on the consolidated statement of income as a reduction in equity in earnings (loss) of equity method investments.The pipeline resumed operations in the third quarter of 2022 and remediation efforts are underway. It may be necessary for Osage to expend or accrue additional amounts for environmental remediation or other release-related expenses in future periods, but we cannot estimate those amounts at this time. Future costs and accruals could have a material impact on our results of operations and cash flows in the period recorded; however, we do not expect them to have a material impact on our financial position.

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Subsequent Event	3 Months Ended
	Mar. 31, 2023
Subsequent Events [Abstract]
Subsequent Event	Subsequent EventOn May 3, 2023, we received a non-binding proposal from HF Sinclair to acquire all of the outstanding common units (“Common Units”) of HEP not beneficially owned by HF Sinclair or its affiliates in exchange for shares of common stock, par value $0.01 per share (“Common Stock”) of HF Sinclair. Under the proposal, HEP unitholders would receive newly issued shares of Common Stock at a fixed exchange ratio of 0.3714 per each publicly held Common Unit, which was derived using the 30-day volume weighted average prices for each security as of market close on May 3, 2023 (the “Proposed HF Sinclair Transaction”). The proposal has been made to the board of directors of our ultimate general partner (the “Board”). It is anticipated that the Board will authorize the Conflicts Committee of the Board (the “Conflicts Committee”), which is comprised of independent members of the Board, to review, evaluate and negotiate the Proposed HF Sinclair Transaction. The Proposed HF Sinclair Transaction is subject to the negotiation and execution of a definitive agreement. There can be no assurance that a definitive agreement will be executed or that any transaction will be approved or consummated.

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Description of Business and Presentation of Financial Statements (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Principles of Consolidation and Common Control Transactions

Principles of Consolidation and Common Control Transactions

The consolidated financial statements include our accounts and those of subsidiaries and joint ventures that we control. All significant intercompany transactions and balances have been eliminated.

Most of our acquisitions from HFC occurred while we were a consolidated variable interest entity (“VIE”) of HFC. Therefore, as an entity under common control with HFC, we recorded these acquisitions on our balance sheets at HFC's historical basis instead of our purchase price or fair value.

Goodwill and Long-lived Assets

Goodwill and Long-lived Assets

Goodwill represents the excess of our cost of an acquired business over the fair value of the assets acquired, less liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Our goodwill impairment testing first entails either a quantitative assessment or an optional qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that based on the qualitative factors that it is more likely than not that the carrying amount of the reporting unit is greater than its fair value, a quantitative test is performed in which we estimate the fair value of the related reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired, and we measure goodwill impairment as the excess of the carrying amount of the reporting unit over the related fair value.

We evaluate long-lived assets, including finite-lived intangible assets, for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value.

Revenue Recognition

Revenue Recognition

Revenues are generally recognized as products are shipped through our pipelines and terminals, feedstocks are processed through our refinery processing units or other services are rendered. The majority of our contracts with customers meet the definition of a lease since (1) performance of the contracts is dependent on specified property, plant, or equipment and (2) it is remote that one or more parties other than the customer will take more than a minor amount of the output associated with the specified property, plant, or equipment. The lease standard (see below) allows the election of a practical expedient whereby a lessor does not have to separate non-lease (service) components from lease components for operating leases under certain conditions. We have made this election for contracts with operating leases. Under this practical expedient, we treat the combined components as a single performance obligation in accordance with Accounting Standards Codification (“ASC”) 606, which largely codified ASU 2014-09, if the non-lease (service) component is the dominant component. If the lease component is the dominant component, we treat the combined components as a lease in accordance with ASC 842, which largely codified ASU 2016-02. The practical expedient does not apply for sales-type leases. Therefore, we bifurcate the consideration received for those contracts between lease and service components. The service component is accounted for within the scope of ASC 606.

Several of our contracts include incentive or reduced tariffs once a certain quarterly volume is met. Revenue from the variable element of these transactions is recognized based on the actual volumes shipped as it relates specifically to rendering the services during the applicable quarter.

The majority of our long-term transportation contracts specify minimum volume requirements, whereby, we bill a customer for a minimum level of shipments in the event a customer ships below their contractual requirements. If there are no future performance obligations, we will recognize these deficiency payments in revenue.

In certain of these throughput agreements, a customer may later utilize such shortfall billings as credit towards future volume shipments in excess of its minimum levels within its respective contractual shortfall make-up period. Such amounts represent an obligation to perform future services, which may be initially deferred and later recognized as revenue based on estimated future shipping levels, including the likelihood of a customer’s ability to utilize such amounts prior to the end of the contractual shortfall make-up period. We recognize these deficiency payments in revenue when we do not expect we will be required to satisfy these performance obligations in the future based on the pattern of rights projected to be exercised by the customer. During the three months ended March 31, 2023 and 2022, we recognized $4.8 million and $5.2 million, respectively, of these deficiency payments in revenue, of which $0.9 million of the deficiency payments recognized during the three months ended March 31, 2022, related to deficiency payments billed in prior periods.

We have other cost reimbursement provisions in our throughput / storage agreements providing that customers (including HF Sinclair) reimburse us for certain costs. Such reimbursements are recorded as revenue or deferred revenue depending on the nature of the cost. Deferred revenue is recognized over the remaining contractual term of the related throughput agreement.

Lessee Accounting

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessee Accounting

At inception, we determine if an arrangement is or contains a lease. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our payment obligation under the leasing arrangement. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our estimated incremental borrowing rate (“IBR”) to determine the present value of lease payments as most of our leases do not contain an implicit rate. Our IBR represents the interest rate which we would pay to borrow, on a collateralized basis, an amount equal to the lease payments over a similar term in a similar economic environment. We use the implicit rate when readily determinable.

Operating leases are recorded in operating lease right-of-use assets and current and noncurrent operating lease liabilities on our consolidated balance sheet. Finance leases are included in properties and equipment, current finance lease liabilities and noncurrent finance lease liabilities on our consolidated balance sheet.

When renewal options are defined in a lease, our lease term includes an option to extend the lease when it is reasonably certain we will exercise that option. Leases with a term of 12 months or less are not recorded on our balance sheet, and lease expense is

accounted for on a straight-line basis. In addition, as a lessee, we separate non-lease components that are identifiable and exclude them from the determination of net present value of lease payment obligations.

Lessor Accounting

Leases

We adopted ASC 842 effective January 1, 2019, and elected to adopt using the modified retrospective transition method and practical expedients, both of which are provided as options by the standard and further defined below.

Lessor Accounting

Customer contracts that contain leases are generally classified as either operating leases, direct finance leases or sales-type leases. We consider inputs such as the lease term, fair value of the underlying asset and residual value of the underlying assets when assessing the classification.

Deferred Turnaround Costs

Deferred Turnaround Costs

Our refinery processing units require regular major maintenance and repairs which are commonly referred to as “turnarounds.” The required frequency of the maintenance varies by unit, but generally is every four to five years. Turnaround costs are deferred and amortized over the period until the next scheduled turnaround.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability) including assumptions about risk. GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

•(Level 1) Quoted prices in active markets for identical assets or liabilities.

•(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

•(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

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Sinclair Acquisition (Tables)

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of Purchase Price Consideration and Allocation

The following tables present the purchase consideration and final purchase price allocation to the assets acquired and liabilities assumed on March 14, 2022:

Purchase Consideration (in thousands except for per share amounts)
HEP common units issued	21,000
Closing price per unit of HEP common units(1)	$	16.62
Purchase consideration paid in HEP common units	349,020
Cash consideration paid by HEP	325,000
Working capital adjustment payment by HEP(2)	3,955
Total cash consideration	328,955
Total purchase consideration	$	677,975

(1) Based on the HEP closing unit price on March 11, 2022.

(2) Net of cash acquired

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

	(In thousands)
Assets Acquired
Accounts receivable	$	3,005
Prepaid and other current assets	59
Properties and equipment	340,682
Operating lease right-of-use assets	105
Other assets	3,500
Goodwill	119,112
Equity method investments	229,891
Total assets acquired	$	696,354
Liabilities Assumed
Accounts payable	1,528
Accrued property taxes	973
Other current liabilities	789
Operating lease liabilities	33
Noncurrent operating lease liabilities	72
Other long-term liabilities	14,984
Total liabilities assumed	$	18,379
Net assets acquired	$	677,975

Schedule of Pro Forma Information

The pro forma combined condensed financial data has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the HEP Transaction taken place on January 1, 2021 and is not intended to be a projection of future results.

		Three Months Ended March 31, 2022
	(In thousands)
Sales and other revenues		$	134,960
Net income attributable to the partners		$	50,782

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Revenues (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenue

Disaggregated revenues were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Pipelines	$	70,582	$	64,780
Terminals, tanks and loading racks	46,187		37,015
Refinery processing units	26,525		18,403
	$	143,294	$	120,198

Schedule of Revenues

Revenues on our consolidated statements of income were composed of the following lease and service revenues:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Lease revenues	$	87,377	$	72,914
Service revenues	55,917		47,284
	$	143,294	$	120,198

Schedule of Contract Asset and Contract Liability Balances

Our consolidated balance sheets included the contract assets and liabilities in the table below:

	March 31, 2023		December 31, 2022
	(In thousands)
Contract assets	$	8,669	$	6,672
Contract liabilities	$	(3,274)	$	—

Schedule of Future Performance Obligations

We expect to recognize revenue for these unfulfilled performance obligations as shown in the table below (amounts shown in table include both service and lease revenues):

Years Ending December 31,	(In millions)
Remainder of 2023	$	295
2024	367
2025	284
2026	268
2027	236
2028	235
Thereafter	690
Total	$	2,375

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases was as follows (in thousands, except for lease term and discount rate):

	March 31, 2023		December 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$	2,078	$	2,317
Current operating lease liabilities	886		968
Noncurrent operating lease liabilities	1,563		1,720
Total operating lease liabilities	$	2,449	$	2,688
Finance leases:
Properties and equipment	$	7,823	$	7,649
Accumulated amortization	(4,107)		(3,979)
Properties and equipment, net	$	3,716	$	3,670
Current finance lease liabilities	$	4,608	$	4,389
Noncurrent finance lease liabilities	61,645		62,513
Total finance lease liabilities	$	66,253	$	66,902
Weighted average remaining lease term (in years):
Operating leases	4.6		4.6
Finance leases	13.6		13.9
Weighted average discount rate:
Operating leases	4.7%		4.6%
Finance leases	5.7%		5.7%

Schedule of Supplemental Cash Flow Information and Components of Lease Expense

Supplemental cash flow and other information related to leases were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	307	$	276
Operating cash flows on finance leases	$	1,160	$	981
Financing cash flows on finance leases	$	1,012	$	881

The components of lease expense were as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease costs	$	301	$	262
Finance lease costs
Amortization of assets	299		192
Interest on lease liabilities	954		959
Variable lease cost	212		37
Total net lease cost	$	1,766	$	1,450

Schedule of Operating and Finance Lease Maturities

Maturities of lease liabilities were as follows:

	March 31, 2023
	Operating		Finance
	(In thousands)
2023	$	684	$	6,032
2024	608		7,597
2025	491		7,138
2026	326		7,258
2027	205		6,511
2028 and thereafter	318		61,038
Total lease payments	2,632		95,574
Less: Imputed interest	(183)		(29,321)
Total lease obligations	2,449		66,253
Less: Current lease liabilities	(886)		(4,608)
Noncurrent lease liabilities	$	1,563	$	61,645

Sales-Type Lease, Gain Recognized

The balance sheet impacts were composed of the following:

	Three Months Ended March 31, 2022
	(In thousands)
Net investment in leases	$	235,620
Properties and equipment, net	(235,620)
Gain on sales-type leases	$	—

Schedule of Lease Income

Lease income recognized was as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Operating lease revenues	$	82,798	$	69,975
Direct financing lease interest income	537		520
Sales-type lease interest income	19,864		12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	4,579		2,939

Schedule of Minimum Undiscounted Lease Payments

Annual minimum undiscounted lease payments under our leases were as follows as of March 31, 2023:

	Operating		Finance		Sales-type
Years Ending December 31,	(In thousands)
Remainder of 2023	$	222,303	$	1,676	$	62,996
2024	270,998		2,226		82,478
2025	195,194		2,244		80,479
2026	181,204		2,262		80,479
2027	148,739		2,280		80,479
2028 and thereafter	522,446		34,940		681,221
Total lease receipt payments	$	1,540,884	$	45,628	$	1,068,132
Less: Imputed interest			(29,394)		(944,047)
			16,234		124,085
Unguaranteed residual assets at end of leases			—		390,331
Net investment in leases			$	16,234	$	514,416

Schedule of Net Investment in Leases

Net investments in leases recorded on our balance sheet were composed of the following:

	March 31, 2023				December 31, 2022
	Sales-type Leases		Direct Financing Leases		Sales-type Leases		Direct Financing Leases
	(In thousands)				(In thousands)
Lease receivables (1)	$	411,077	$	16,234	$	418,989	$	16,264
Unguaranteed residual assets	103,339		—		110,466		—
Net investment in leases	$	514,416	$	16,234	$	529,455	$	16,264

(1)    Current portion of lease receivables included in prepaid and other current assets on the balance sheet.

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Carrying Amounts of Estimated Fair Values of Senior Notes

The carrying amounts and estimated fair values of our senior notes were as follows:

		March 31, 2023				December 31, 2022
Financial Instrument	Fair Value Input Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(In thousands)
Liabilities:
5% Senior Notes	Level 2	$	494,305	$	468,380	$	494,047	$	458,090
6.375% Senior Notes	Level 2	394,580		398,480		394,287		394,568
Total Liabilities		$	888,885	$	866,860	$	888,334	$	852,658

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Properties and Equipment (Tables)

3 Months Ended

Mar. 31, 2023

Property, Plant and Equipment [Abstract]

Schedule of Properties and Equipment

The carrying amounts of our properties and equipment were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Pipelines, terminals and tankage	$	1,584,825	$	1,567,359
Refinery assets	353,998		353,998
Land and right of way	171,368		171,327
Construction in progress	21,917		23,027
Other	69,550		69,098
	2,201,658		2,184,809
Less accumulated depreciation	(815,698)		(795,921)
	$	1,385,960	$	1,388,888

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets by Major Class

The carrying amounts of our intangible assets were as follows:

	Useful Life	March 31, 2023		December 31, 2022
		(In thousands)
Delek transportation agreement	30 years	$	59,933	$	59,933
HF Sinclair transportation agreement	10-15 years	75,131		75,131
Customer relationships	10 years	69,683		69,683
Other	20 years	50		50
		204,797		204,797
Less accumulated amortization		(148,586)		(145,497)
		$	56,211	$	59,300

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Employees, Retirement and Incentive Plans (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Phantom Units

A summary of phantom unit activity and changes during the three months ended March 31, 2023, is presented below:

Phantom Units	Units	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2023 (nonvested)	115,809	$	16.66
Granted	1,479	18.49
Vesting and transfer of full ownership to recipients	(330)	11.92
Forfeited	(804)	11.92
Outstanding at March 31, 2023 (nonvested)	116,154	16.73

Schedule of Performance Units

A summary of performance unit activity and changes for the three months ended March 31, 2023, is presented below:

Performance Units	Units
Outstanding at January 1, 2023 (nonvested)	42,852
Granted	513
Outstanding at March 31, 2023 (nonvested)	43,365

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The carrying amounts of our long-term debt were as follows:

	March 31, 2023		December 31, 2022
	(In thousands)
Credit Agreement
Amount outstanding	$	651,500	$	668,000
5% Senior Notes
Principal	500,000		500,000
Unamortized premium and debt issuance costs	(5,695)		(5,953)
	494,305		494,047
6.375% Senior Notes
Principal	400,000		400,000
Unamortized premium and debt issuance costs	(5,420)		(5,713)
	394,580		394,287
Total long-term debt	$	1,540,385	$	1,556,334

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Net Income Per Limited Partner Unit (Tables)

3 Months Ended

Mar. 31, 2023

Net Income per Limited Partner Unit [Abstract]

Schedule of Net Income per Limited Partner Unit

Net income per limited partner unit is computed as follows:

	Three Months Ended March 31,
	2023		2022
	(In thousands, except per unit data)
Net income attributable to the partners	$	57,522	$	49,559
Less: Participating securities’ share in earnings	(73)		(111)
Net income attributable to common units	57,449		49,448
Weighted average limited partners’ units outstanding	126,440		109,640
Limited partners’ per unit interest in earnings - basic and diluted	$	0.45	$	0.45

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

	Three Months Ended March 31,
	2023		2022
	(In thousands)
Revenues:
Pipelines and terminals - affiliate	$	90,353	$	73,851
Pipelines and terminals - third-party	26,416		27,944
Refinery processing units - affiliate	26,525		18,403
Total segment revenues	$	143,294	$	120,198
Segment operating income:
Pipelines and terminals	$	55,053	$	49,804
Refinery processing units	11,436		5,582
Total segment operating income	66,489		55,386
Unallocated general and administrative expenses	(4,635)		(4,312)
Interest expense	(25,978)		(13,639)
Interest income	20,400		12,647
Equity in earnings of equity method investments	3,882		3,626
Gain on sale of assets and other	173		101
Income before income taxes	$	60,331	$	53,809
Capital Expenditures:
Pipelines and terminals	$	7,614	$	10,421
Refinery processing units	—		3,726
Total capital expenditures	$	7,614	$	14,147

	March 31, 2023		December 31, 2022
	(In thousands)
Identifiable assets:
Pipelines and terminals (1)	$	2,134,453	$	2,152,159
Refinery processing units	302,280		304,332
Other	296,367		291,011
Total identifiable assets	$	2,733,100	$	2,747,502

(1) Included goodwill of $342.8 million as of March 31, 2023 and December 31, 2022, respectively.

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Supplemental Guarantor / Non-Guarantor Financial Information (Tables)

3 Months Ended

Mar. 31, 2023

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Schedule of Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	7,245	$	(1,130)	$	990	$	—	$	7,105
Accounts receivable	—		86,658		1,414		(1,342)		86,730
Prepaid and other current assets	462		11,472		370		(370)		11,934
Total current assets	7,707		97,000		2,774		(1,712)		105,769
Properties and equipment, net	—		1,385,960		—		—		1,385,960
Operating lease right-of-use assets	—		2,078		—		—		2,078
Net investment in leases	—		524,564		101,954		(101,954)		524,564
Investment in subsidiaries	2,428,056		68,956		—		(2,497,012)		—
Intangible assets, net	—		56,211		—		—		56,211
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		240,007		34,135		—		274,142
Deferred turnaround costs	—		23,363		—		—		23,363
Other assets	5,420		12,831		—		—		18,251
Total assets	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,050	$	396	$	(1,342)	$	28,104
Accrued interest	17,567		—		—		—		17,567
Deferred revenue	—		15,316		—		—		15,316
Accrued property taxes	—		7,101		—		—		7,101
Current operating lease liabilities	—		886		—		—		886
Current finance lease liabilities	—		6,867		—		(2,259)		4,608
Other current liabilities	439		2,054		555		—		3,048
Total current liabilities	18,006		61,274		951		(3,601)		76,630
Long-term debt	1,540,385		—		—		—		1,540,385
Noncurrent operating lease liabilities	—		1,563		—		—		1,563
Noncurrent finance lease liabilities	—		149,828		—		(88,183)		61,645
Other long-term liabilities	216		29,517		—		—		29,733
Deferred revenue	—		21,963		—		—		21,963
Class B unit	—		61,531		—		—		61,531
Equity - partners	882,576		2,428,056		68,956		(2,508,894)		870,694
Equity - noncontrolling interests	—		—		68,956		—		68,956
Total liabilities and equity	$	2,441,183	$	2,753,732	$	138,863	$	(2,600,678)	$	2,733,100

Condensed Consolidating Balance Sheet

December 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,316	$	4,454	$	2,147	$	—	$	10,917
Accounts receivable	—		79,689		1,453		(1,339)		79,803
Prepaid and other current assets	256		12,141		356		(356)		12,397
Total current assets	4,572		96,284		3,956		(1,695)		103,117
Properties and equipment, net	—		1,388,888		—		—		1,388,888
Operating lease right-of-use assets	—		2,317		—		—		2,317
Net investment in leases	—		539,705		101,871		(101,871)		539,705
Investment in subsidiaries	2,432,767		69,754		—		(2,502,521)		—
Intangible assets, net	—		59,300		—		—		59,300
Goodwill	—		342,762		—		—		342,762
Equity method investments	—		235,858		34,746		—		270,604
Deferred turnaround costs	—		24,154		—		—		24,154
Other assets	5,865		10,790		—		—		16,655
Total assets	$	2,443,204	$	2,769,812	$	140,573	$	(2,606,087)	$	2,747,502
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	43,303	$	545	$	(1,339)	$	42,509
Accrued interest	17,992		—		—		—		17,992
Deferred revenue	—		12,087		—		—		12,087
Accrued property taxes	—		5,449		—		—		5,449
Current operating lease liabilities	—		968		—		—		968
Current finance lease liabilities	—		6,560		—		(2,171)		4,389
Other current liabilities	117		1,793		520		—		2,430
Total current liabilities	18,109		70,160		1,065		(3,510)		85,824
Long-term debt	1,556,334		—		—		—		1,556,334
Noncurrent operating lease liabilities	—		1,720		—		—		1,720
Noncurrent finance lease liabilities	—		150,935		—		(88,422)		62,513
Other long-term liabilities	—		29,111		—		—		29,111
Deferred revenue	—		24,613		—		—		24,613
Class B unit	—		60,507		—		—		60,507
Equity - partners	868,760		2,432,767		69,754		(2,514,155)		857,126
Equity - noncontrolling interests	—		—		69,754		—		69,754
Total liabilities and equity	$	2,443,203	$	2,769,813	$	140,573	$	(2,606,087)	$	2,747,502

Schedule of Condensed Consolidating Statement of Income

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2023	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	116,878	$	—	$	—	$	116,878
Third parties	—		26,416		—		—		26,416
	—		143,294		—		—		143,294
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		50,822		1,320		—		52,142
Depreciation and amortization	—		24,663		—		—		24,663
General and administrative	1,482		3,153		—		—		4,635
	1,482		78,638		1,320		—		81,440
Operating income (loss)	(1,482)		64,656		(1,320)		—		61,854
Other income (expense):
Equity in earnings of subsidiaries	84,028		1,752		—		(85,780)		—
Equity in earnings of equity method investments	—		3,173		709		—		3,882
Interest expense	(25,024)		(5,069)		—		4,115		(25,978)
Interest income	—		20,400		4,115		(4,115)		20,400
Gain on sale of assets and other	—		173		—		—		173
	59,004		20,429		4,824		(85,780)		(1,523)
Income before income taxes	57,522		85,085		3,504		(85,780)		60,331
State income tax expense	—		(34)		—		—		(34)
Net income	57,522		85,051		3,504		(85,780)		60,297
Allocation of net income attributable to noncontrolling interests	—		(1,023)		(1,752)		—		(2,775)
Net income attributable to the partners	$	57,522	$	84,028	$	1,752	$	(85,780)	$	57,522

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2022	Parent		Guarantor Restricted Subsidiaries		Non-Guarantor Non-Restricted Subsidiaries		Eliminations		Consolidated
	(In thousands)
Revenues:
Affiliates	$	—	$	92,254	$	—	$	—	$	92,254
Third parties	—		27,944		—		—		27,944
	—		120,198		—		—		120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—		41,934		691		—		42,625
Depreciation and amortization	—		22,187		—		—		22,187
General and administrative	1,088		3,224		—		—		4,312
	1,088		67,345		691		—		69,124
Operating income (loss)	(1,088)		52,853		(691)		—		51,074
Other income (expense):
Equity in earnings of subsidiaries	63,327		2,171		—		(65,498)		—
Equity in earnings of equity method investments	—		2,720		906		—		3,626
Interest expense	(12,680)		(5,086)		—		4,127		(13,639)
Interest income	—		12,647		4,127		(4,127)		12,647
Gain on sale of assets and other	—		101		—		—		101
	50,647		12,553		5,033		(65,498)		2,735
Income before income taxes	49,559		65,406		4,342		(65,498)		53,809
State income tax expense	—		(31)		—		—		(31)
Net income	49,559		65,375		4,342		(65,498)		53,778
Allocation of net income attributable to noncontrolling interests	—		(2,048)		(2,171)		—		(4,219)
Net income attributable to the partners	$	49,559	$	63,327	$	2,171	$	(65,498)	$	49,559

XML

Description of Business and Presentation of Financial Statements (Details) $ in Thousands, bbl in Millions		3 Months Ended
	Mar. 14, 2022 USD ($) terminal mi shares bbl	Mar. 31, 2023 USD ($) segment	Mar. 31, 2022 USD ($)
Other Ownership Interests [Line Items]
Number of reportable segments | segment		2
Deficiency payments billed in prior periods			$ 900
Minimum
Other Ownership Interests [Line Items]
Frequency of maintenance		4 years
Maximum
Other Ownership Interests [Line Items]
Frequency of maintenance		5 years
Shortfall Billings
Other Ownership Interests [Line Items]
Recognition of deficiency payments in revenue		$ 4,800	$ 5,200
Osage
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage		50.00%
Cheyenne Pipeline LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage		50.00%
Cushing Connect Pipeline & Terminal LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage		50.00%
Saddle Butte Pipeline III, LLC
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage	25.06%	25.06%
Pioneer Investments Corp.
Other Ownership Interests [Line Items]
Equity method investment, ownership percentage	49.995%	49.995%
UNEV
Other Ownership Interests [Line Items]
Remaining ownership interest acquired	0.25
Sinclair Merger
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Value of shares issued in transaction	$ 349,020
Transaction cash considerations transferred	328,955
Aggregate consideration paid in transaction	$ 677,975
Size of pipeline | mi	1,200
Number of product terminals | terminal	8
Number of crude terminals | terminal	2
Terminal storage (in barrels) | bbl	4.5
Sinclair Merger | REH Company
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Percentage of pro forma equity representing shares issued in transaction	0.166
Value of shares issued in transaction	$ 349,000
Transaction cash considerations transferred	329,000
Aggregate consideration paid in transaction	$ 678,000
Shares originally held in escrow (in shares) | shares	5,290,000
HF Sinclair
Other Ownership Interests [Line Items]
Percentage of ownership in variable interest entity		47.00%
HF Sinclair | Sinclair Merger | REH Company
Other Ownership Interests [Line Items]
Units issued in transaction (in shares) | shares	60,230,036
Percentage of pro forma equity representing shares issued in transaction	0.27
Value of shares issued in transaction	$ 2,149,000

XML

Sinclair Acquisition - Narrative (Details) $ in Thousands, bbl in Millions		3 Months Ended
	Mar. 14, 2022 USD ($) terminal nomination mi shares bbl	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Business Acquisition [Line Items]
Goodwill		$ 342,762	$ 342,762
Saddle Butte Pipeline III, LLC
Business Acquisition [Line Items]
Equity method investment, ownership percentage	25.06%	25.06%
Pioneer Investments Corp.
Business Acquisition [Line Items]
Equity method investment, ownership percentage	49.995%	49.995%
UNEV
Business Acquisition [Line Items]
Remaining ownership interest acquired	0.25
REH Company
Business Acquisition [Line Items]
Number of nominations to the Board of Directors | nomination	1
Sinclair Merger
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Value of shares issued in transaction	$ 349,020
Transaction cash considerations transferred	328,955
Aggregate consideration paid in transaction	$ 677,975
Size of pipeline | mi	1,200
Number of product terminals | terminal	8
Number of crude terminals | terminal	2
Barrels of crude oil, value | bbl	4.5
Goodwill	$ 119,112
Incremental acquisition and integration costs		$ 500
Sinclair Merger | REH Company
Business Acquisition [Line Items]
Ownership threshold of units under agreement (in shares) | shares	10,500,000
Ownership percentage threshold under agreement (in shares)	0.05
Sinclair Merger | REH Company
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	21,000,000
Percentage of pro forma equity representing shares issued in transaction	0.166
Value of shares issued in transaction	$ 349,000
Transaction cash considerations transferred	329,000
Aggregate consideration paid in transaction	$ 678,000
Units issued in transaction, restricted to lock-up period (in shares) | shares	15,750,000
Sinclair Merger | REH Company | HF Sinclair
Business Acquisition [Line Items]
Units issued in transaction (in shares) | shares	60,230,036
Percentage of pro forma equity representing shares issued in transaction	0.27
Value of shares issued in transaction	$ 2,149,000

XML

Sinclair Acquisition - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Sinclair Merger $ / shares in Units, $ in Thousands	Mar. 14, 2022 USD ($) $ / shares shares
Business Acquisition [Line Items]
HEP Common units issued (in shares) | shares	21,000,000
Closing price per unit (in USD per share) | $ / shares	$ 16.62
Purchase consideration paid in HEP common units	$ 349,020
Cash consideration paid by HEP	325,000
Working capital adjustment payment by HEP	3,955
Total cash consideration	328,955
Total purchase consideration	$ 677,975

XML

Sinclair Acquisition - Schedule of Purchase Consideration (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 14, 2022
Assets Acquired
Goodwill	$ 342,762	$ 342,762
Sinclair Merger
Assets Acquired
Accounts receivable			$ 3,005
Prepaid and other current assets			59
Properties and equipment			340,682
Operating lease right-of-use assets			105
Other assets			3,500
Goodwill			119,112
Equity method investments			229,891
Total assets acquired			696,354
Liabilities Assumed
Accounts payable			1,528
Accrued property taxes			973
Other current liabilities			789
Operating lease liabilities			33
Noncurrent operating lease liabilities			72
Other long-term liabilities			14,984
Total liabilities assumed			18,379
Net assets acquired			$ 677,975

XML

Sinclair Acquisition - Schedule of Pro Forma Information (Details) - Sinclair Merger $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Business Acquisition [Line Items]
Sales and other revenues	$ 134,960
Net income attributable to the partners	$ 50,782

XML

Cushing Connect Joint Venture (Details) - Cushing Connect Joint Venture bbl in Thousands	Oct. 02, 2019 bbl
Schedule of Equity Method Investments [Line Items]
Pipeline volume (in barrels per day)	160
Terminal storage (in barrels)	1,500

XML

Revenues - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 143,294	$ 120,198
Pipelines
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	70,582	64,780
Terminals, tanks and loading racks
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	46,187	37,015
Refinery processing units
Disaggregation of Revenue [Line Items]
Disaggregated Revenue	$ 26,525	$ 18,403

XML

Revenues - Schedule of Affiliate and Third Party Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue from External Customer [Line Items]
Lease revenues	$ 87,377	$ 72,914
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]	Lease and service revenues	Lease and service revenues
Lease and service revenues	$ 143,294	$ 120,198
Service revenues
Revenue from External Customer [Line Items]
Service revenues	$ 55,917	$ 47,284

XML

Revenues - Schedule of Contract Asset and Liability Balances (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Contract assets	$ 8,669	$ 6,672
Contract liabilities	$ (3,274)	$ 0

XML

Revenues - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue from External Customer [Line Items]
Revenue previously included in contract liability		$ 900
Revenue included in contract assets	$ 2,100	$ 45
Performance obligation revenue	$ 2,375,000
Minimum
Revenue from External Customer [Line Items]
Payment terms under contracts with customers	10 days
Maximum
Revenue from External Customer [Line Items]
Payment terms under contracts with customers	30 days

XML

Revenues - Schedule of Future Performance Obligations (Details) $ in Millions	Mar. 31, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 2,375
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 295
Satisfaction period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 367
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 284
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 268
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 236
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2028-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 235
Satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2029-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Unfulfilled performance obligation revenue	$ 690
Satisfaction period	1 year

XML

Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2023 USD ($) renewalOption	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Lessee, Lease, Description [Line Items]
Finance lease term	10 years
Cost of asset under finance leases	$ 7,823,000		$ 7,649,000
Accumulated depreciation of assets under finance leases	$ 4,107,000		$ 3,979,000
Number of renewal options | renewalOption	1
Finance lease extension option term	10 years
Gain (loss) on sales-type lease	$ 0	$ 0
Minimum
Lessee, Lease, Description [Line Items]
Operating lease term	1 year
Minimum | Vehicles
Lessee, Lease, Description [Line Items]
Finance lease term	33 months
Maximum
Lessee, Lease, Description [Line Items]
Operating lease term	22 years
Operating lease renewal term	10 years
Maximum | Vehicles
Lessee, Lease, Description [Line Items]
Finance lease term	48 months

XML

Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Operating leases:
Operating lease right-of-use assets, net	$ 2,078	$ 2,317
Current operating lease liabilities	886	968
Noncurrent operating lease liabilities	1,563	1,720
Total operating lease liabilities	2,449	2,688
Finance leases:
Properties and equipment	7,823	7,649
Accumulated amortization	(4,107)	(3,979)
Properties and equipment, net	$ 3,716	$ 3,670
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Properties and equipment, net	Properties and equipment, net
Current finance lease liabilities	$ 4,608	$ 4,389
Noncurrent finance lease liabilities	61,645	62,513
Total finance lease liabilities	$ 66,253	$ 66,902
Weighted average remaining lease term (in years):
Operating leases	4 years 7 months 6 days	4 years 7 months 6 days
Finance leases	13 years 7 months 6 days	13 years 10 months 24 days
Weighted average discount rate:
Operating leases	4.70%	4.60%
Finance leases	5.70%	5.70%

XML

Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$ 307	$ 276
Operating cash flows on finance leases	1,160	981
Financing cash flows on finance leases	$ 1,012	$ 881

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Leases - Operating and Finance Lease Maturities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Operating
2023	$ 684
2024	608
2025	491
2026	326
2027	205
2028 and thereafter	318
Total lease payments	2,632
Less: Imputed interest	(183)
Total operating lease liabilities	2,449	$ 2,688
Less: Current lease liabilities	(886)	(968)
Noncurrent operating lease liabilities	1,563	1,720
Finance
2023	6,032
2024	7,597
2025	7,138
2026	7,258
2027	6,511
2028 and thereafter	61,038
Total lease payments	95,574
Less: Imputed interest	(29,321)
Total finance lease liabilities	66,253	66,902
Less: Current lease liabilities	(4,608)	(4,389)
Noncurrent lease liabilities	$ 61,645	$ 62,513

XML

Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Operating lease costs	$ 301	$ 262
Amortization of assets	299	192
Interest on lease liabilities	954	959
Variable lease cost	212	37
Total net lease cost	$ 1,766	$ 1,450

XML

Leases - Gain on Sales-Type Leases (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Net investment in leases		$ 235,620,000
Properties and equipment, net		(235,620,000)
Gain on sales-type leases	$ 0	$ 0

XML

Leases - Schedule of Lease Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Operating lease revenues	$ 82,798	$ 69,975
Direct financing lease interest income	537	520
Sales-type lease interest income	19,864	12,123
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable	$ 4,579	$ 2,939

XML

Leases - Schedule of Minimum Undiscounted Lease Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022
Operating
Remainder of 2023	$ 222,303
2024	270,998
2025	195,194
2026	181,204
2027	148,739
2028 and thereafter	522,446
Total lease receipt payments	1,540,884
Sales-type
Net investment in leases		$ 235,620
Finance
Finance and Sales-type
Remainder of 2023	1,676
2024	2,226
2025	2,244
2026	2,262
2027	2,280
2028 and thereafter	34,940
Total lease receipt payments	45,628
Finance
Less: Imputed interest	(29,394)
Finance lease receivables	16,234
Unguaranteed residual assets at end of leases	0
Net investment in leases	16,234
Sales-type
Finance and Sales-type
Remainder of 2023	62,996
2024	82,478
2025	80,479
2026	80,479
2027	80,479
2028 and thereafter	681,221
Total lease receipt payments	1,068,132
Sales-type
Less: Imputed interest	(944,047)
Sales-type lease receivables	124,085
Unguaranteed residual assets at end of leases	390,331
Net investment in leases	$ 514,416

XML

Leases - Net Investments in Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Sales-type
Lease receivable	$ 411,077	$ 418,989
Unguaranteed residual assets	103,339	110,466
Net investment in leases	514,416	529,455
Finance
Lease receivables	16,234	16,264
Unguaranteed residual assets	0	0
Net investment in leases	$ 16,234	$ 16,264

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Apr. 08, 2022
5% Senior Notes
Debt Instrument [Line Items]
Stated interest rate, senior notes	5.00%
6.375% Senior Notes
Debt Instrument [Line Items]
Stated interest rate, senior notes	6.375%		6.375%
Carrying Value
Debt Instrument [Line Items]
Total Liabilities	$ 888,885	$ 888,334
Carrying Value | Level 2 | 5% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	494,305	494,047
Carrying Value | Level 2 | 6.375% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	394,580	394,287
Fair Value
Debt Instrument [Line Items]
Total Liabilities	866,860	852,658
Fair Value | Level 2 | 5% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	468,380	458,090
Fair Value | Level 2 | 6.375% Senior Notes
Debt Instrument [Line Items]
Total Liabilities	$ 398,480	$ 394,568

XML

Properties and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Properties and equipment	$ 2,201,658		$ 2,184,809
Less accumulated depreciation	(815,698)		(795,921)
Properties and equipment, net	1,385,960		1,388,888
Depreciation expense	20,200	$ 18,500
Pipelines, terminals and tankage
Property, Plant and Equipment [Line Items]
Properties and equipment	1,584,825		1,567,359
Refinery assets
Property, Plant and Equipment [Line Items]
Properties and equipment	353,998		353,998
Land and right of way
Property, Plant and Equipment [Line Items]
Properties and equipment	171,368		171,327
Construction in progress
Property, Plant and Equipment [Line Items]
Properties and equipment	21,917		23,027
Other
Property, Plant and Equipment [Line Items]
Properties and equipment	$ 69,550		$ 69,098

XML

Intangible Assets (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 204,797,000		$ 204,797,000
Less accumulated amortization	(148,586,000)		(145,497,000)
Intangible assets, net	56,211,000		59,300,000
Amortization expense	3,100,000	$ 3,500,000
Estimated amortization expense for 2024	9,100,000
Estimated amortization expense for 2025	9,100,000
Estimated amortization expense for 2026	9,100,000
Estimated amortization expense for 2027	9,100,000
Estimated amortization expense for 2028	9,000,000
Basis in transportation agreements	$ 0
Delek transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	30 years
Intangible assets, gross	$ 59,933,000		59,933,000
HF Sinclair transportation agreement
Finite-Lived Intangible Assets, Net [Abstract]
Intangible assets, gross	$ 75,131,000		75,131,000
HF Sinclair transportation agreement | Minimum
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	10 years
HF Sinclair transportation agreement | Maximum
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	15 years
Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	10 years
Intangible assets, gross	$ 69,683,000		69,683,000
Other
Finite-Lived Intangible Assets, Net [Abstract]
Useful Life	20 years
Intangible assets, gross	$ 50,000		$ 50,000

XML

Employees, Retirement and Incentive Plans - Retirement and Benefit Plan Costs (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) plan component shares	Mar. 31, 2022 USD ($)
Share-based Compensation Arrangements
Retirement and benefit costs | $	$ 3.0	$ 2.4
Number of long-term incentive plan components | component	5
Number of incentive-based award plans | plan	2
Compensation costs | $	$ 0.4	$ 0.6
Long-term Incentive Plan
Share-based Compensation Arrangements
Units authorized to be granted (in shares) | shares	2,500,000
Units not yet granted (in shares) | shares	771,313

XML

Employees, Retirement and Incentive Plans - Phantom Units (Details) - Phantom Units - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Units outstanding at beginning of period (in shares)	115,809
Granted (in shares)	1,479
Vesting and transfer of full ownership to recipients (in shares)	(330)
Forfeited (in shares)	(804)
Units outstanding at end of period (in shares)	116,154
Weighted Average Grant-Date Fair Value
Units outstanding at beginning of period (in USD per share)	$ 16.66
Granted (in USD per share)	18.49
Vesting and transfer of full ownership to recipients (in USD per share)	11.92
Forfeited (in USD per share)	11.92
Units outstanding at end of period (in USD per share)	$ 16.73
Grant date fair value of units vested and transferred	$ 4	$ 39
Unrecognized compensation related to nonvested units	$ 1,100
Weighted average recognition period	1 year 1 month 6 days
Minimum
Share-based Compensation Arrangements
Award vesting period	1 year
Maximum
Share-based Compensation Arrangements
Award vesting period	3 years

XML

Employees, Retirement and Incentive Plans - Performance Units (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Performance Shares
Share-based Compensation Arrangement, Nonvested [Roll Forward]
Units outstanding at beginning of period (in shares)	42,852
Granted (in shares)	513
Units outstanding at end of period (in shares)	43,365
Grant date fair value of units vested and transferred		$ 600,000
Value of performance units vested and expected to vest	$ 700,000
Unrecognized compensation related to nonvested units	$ 500,000
Weighted average recognition period	1 year 4 months 24 days
Long-term Incentive Plan
Share-based Compensation Arrangement, Nonvested [Roll Forward]
Purchase of common units	$ 0
Long-term Incentive Plan | Performance Shares
Share-based Compensation Arrangements
Performance period	3 years
Range of performance units earned, minimum	0.00%
Range of performance units earned, maximum	200.00%

XML

Debt - Credit Agreement (Details)	Apr. 30, 2021 USD ($)
Debt Instrument [Line Items]
Maximum borrowing capacity under revolving credit agreement	$ 1,200,000,000
Line of credit maximum accordion feature	1,700,000,000
Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity under revolving credit agreement	$ 50,000,000

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Debt - Senior Notes (Details) - USD ($)	Apr. 08, 2022	Mar. 31, 2023
6.375% Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount of senior note	$ 400,000,000
Stated interest rate, senior notes	6.375%	6.375%
Proceeds from issuance of debt	$ 393,000,000
5% Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount of senior note		$ 500,000,000
Stated interest rate, senior notes		5.00%

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Debt - Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Apr. 08, 2022
Debt Instrument [Line Items]
Amount outstanding	$ 651,500	$ 668,000
Total long-term debt	1,540,385	1,556,334
5% Senior Notes
Debt Instrument [Line Items]
Principal	500,000	500,000
Unamortized premium and debt issuance costs	(5,695)	(5,953)
Senior Notes	$ 494,305	494,047
Stated interest rate, senior notes	5.00%
6.375% Senior Notes
Debt Instrument [Line Items]
Principal	$ 400,000	400,000
Unamortized premium and debt issuance costs	(5,420)	(5,713)
Senior Notes	$ 394,580	$ 394,287
Stated interest rate, senior notes	6.375%		6.375%

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Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Related Party Transaction [Line Items]
Revenues:	$ 143,294	$ 120,198
Accounts receivables due	71,295		$ 63,459
Accounts payable due	9,948		15,756
Lease income	600	500
Sales-type lease payments received	$ 20,600	$ 12,600
Sales-Type Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration]	Gain on sale of assets and other	Gain on sale of assets and other
HF Sinclair
Related Party Transaction [Line Items]
Minimum annualized payments received	$ 456,600
Administrative fee	1,300	$ 800
Revenues:	116,900	92,300
Reimbursements for expense and capital projects	1,300	3,100
Distributions on common units	20,900	20,900
Accounts receivables due	71,300		63,500
Accounts payable due	9,900		$ 15,800
Deferred revenue	3,300
HF Sinclair | Annual Administrative Fee
Related Party Transaction [Line Items]
Administrative fee	5,000
HF Sinclair | Reimbursements Paid
Related Party Transaction [Line Items]
Expense of employees supporting operations	$ 20,600	$ 16,100
HF Sinclair | Revenue Benchmark | Revenue from Rights Concentration Risk
Related Party Transaction [Line Items]
Percentage of total revenue	82.00%

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Partners' Equity Income Allocations and Cash Distributions (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Apr. 20, 2023	Mar. 31, 2023	Mar. 31, 2022
Class of Stock [Line Items]
Partners' capital units held by controlling interest (in shares)		59,630,030
Ownership percentage, controlling interest		47.00%
Value of common units available to issue and sell under offering program		$ 200.0
Units issued under offering program to date (in shares)		2,413,153
Proceeds from common unit issuance program		$ 82.3
Units issued under offering program during the period (in shares)		0	0
Cash distributions		$ 44.3	$ 44.3
Subsequent Event
Class of Stock [Line Items]
Cash distribution declared (in USD per share)	$ 0.35

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Net Income Per Limited Partner Unit (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net Income per Limited Partner Unit [Abstract]
Net income attributable to the partners	$ 57,522	$ 49,559
Less: Participating securities’ share in earnings	(73)	(111)
Net income attributable to common units	$ 57,449	$ 49,448
Weighted average limited partners’ units outstanding, basic (in shares)	126,440	109,640
Weighted average limited partners’ units outstanding, diluted (in shares)	126,440	109,640
Limited partners’ per unit interest in earnings— basic (in USD per share)	$ 0.45	$ 0.45
Limited partners’ per unit interest in earnings— diluted (in USD per share)	$ 0.45	$ 0.45

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Environmental (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Loss Contingencies [Line Items]
Environmental remediation expense	$ 0.4	$ 0.1
Environmental Remediation Expense, Statement of Income or Comprehensive Income [Extensible Enumeration]	Operations (exclusive of depreciation and amortization)	Operations (exclusive of depreciation and amortization)
Accrued environmental liabilities	$ 19.8		$ 19.5
Other Noncurrent Liabilities
Loss Contingencies [Line Items]
Accrued environmental liabilities	$ 17.8		$ 17.5

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Segments Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) segment processingUnit facility	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment	2
Revenues:	$ 143,294	$ 120,198
Operating income	61,854	51,074
Unallocated general and administrative expenses	(4,635)	(4,312)
Interest expense	(25,978)	(13,639)
Interest income	20,400	12,647
Equity in earnings of equity method investments	3,882	3,626
Gain on sale of assets and other	173	101
Income before income taxes	60,331	53,809
Capital Expenditures:	7,614	14,147
Identifiable assets:	2,733,100		$ 2,747,502
Goodwill	342,762		342,762
Affiliates
Segment Reporting Information [Line Items]
Revenues:	116,878	92,254
Third parties
Segment Reporting Information [Line Items]
Revenues:	26,416	27,944
Operating Segments
Segment Reporting Information [Line Items]
Revenues:	143,294	120,198
Operating income	66,489	55,386
Other
Segment Reporting Information [Line Items]
Identifiable assets:	$ 296,367		291,011
Refinery processing units
Segment Reporting Information [Line Items]
Number of refinery processing units | processingUnit	5
Number of HF Sinclair refining facility locations | facility	2
Revenues:	$ 26,525	18,403
Capital Expenditures:	0	3,726
Refinery processing units | Operating Segments
Segment Reporting Information [Line Items]
Revenues:	26,525	18,403
Operating income	11,436	5,582
Identifiable assets:	302,280		304,332
Pipelines and terminals
Segment Reporting Information [Line Items]
Capital Expenditures:	7,614	10,421
Pipelines and terminals | Operating Segments
Segment Reporting Information [Line Items]
Operating income	55,053	49,804
Identifiable assets:	2,134,453		$ 2,152,159
Pipelines and terminals | Operating Segments | Affiliates
Segment Reporting Information [Line Items]
Revenues:	90,353	73,851
Pipelines and terminals | Operating Segments | Third parties
Segment Reporting Information [Line Items]
Revenues:	$ 26,416	$ 27,944

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Supplemental Guarantor / Non-Guarantor Financial Information - Narrative (Details)	Mar. 14, 2022
UNEV
Other Ownership Interests [Line Items]
Ownership interest percentage	1

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Supplemental Guarantor / Non-Guarantor Financial Information - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 7,105	$ 10,917
Accounts receivable	86,730	79,803
Prepaid and other current assets	11,934	12,397
Total current assets	105,769	103,117
Properties and equipment, net	1,385,960	1,388,888
Operating lease right-of-use assets, net	2,078	2,317
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	524,564	539,705
Investment in subsidiaries	0	0
Intangible assets, net	56,211	59,300
Goodwill	342,762	342,762
Equity method investments	274,142	270,604
Deferred turnaround costs	23,363	24,154
Other assets	18,251	16,655
Total assets	2,733,100	2,747,502
Current liabilities:
Accounts payable	28,104	42,509
Accrued interest	17,567	17,992
Deferred revenue	15,316	12,087
Accrued property taxes	7,101	5,449
Current operating lease liabilities	886	968
Current finance lease liabilities	4,608	4,389
Other current liabilities	3,048	2,430
Total current liabilities	76,630	85,824
Long-term debt	1,540,385	1,556,334
Noncurrent operating lease liabilities	1,563	1,720
Noncurrent finance lease liabilities	61,645	62,513
Other long-term liabilities	29,733	29,111
Deferred revenue	21,963	24,613
Class B unit	61,531	60,507
Equity - partners	870,694	857,126
Equity - noncontrolling interests	68,956	69,754
Total liabilities and equity	2,733,100	2,747,502
Eliminations
Current assets:
Cash and cash equivalents	0	0
Accounts receivable	(1,342)	(1,339)
Prepaid and other current assets	(370)	(356)
Total current assets	(1,712)	(1,695)
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	(101,954)	(101,871)
Investment in subsidiaries	(2,497,012)	(2,502,521)
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Deferred turnaround costs	0	0
Other assets	0	0
Total assets	(2,600,678)	(2,606,087)
Current liabilities:
Accounts payable	(1,342)	(1,339)
Accrued interest	0	0
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	(2,259)	(2,171)
Other current liabilities	0	0
Total current liabilities	(3,601)	(3,510)
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	(88,183)	(88,422)
Other long-term liabilities	0	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	(2,508,894)	(2,514,155)
Equity - noncontrolling interests	0	0
Total liabilities and equity	(2,600,678)	(2,606,087)
Parent | Reportable Legal Entities
Current assets:
Cash and cash equivalents	7,245	4,316
Accounts receivable	0	0
Prepaid and other current assets	462	256
Total current assets	7,707	4,572
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	0	0
Investment in subsidiaries	2,428,056	2,432,767
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	0	0
Deferred turnaround costs	0	0
Other assets	5,420	5,865
Total assets	2,441,183	2,443,204
Current liabilities:
Accounts payable	0	0
Accrued interest	17,567	17,992
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	0	0
Other current liabilities	439	117
Total current liabilities	18,006	18,109
Long-term debt	1,540,385	1,556,334
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	216	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	882,576	868,760
Equity - noncontrolling interests	0	0
Total liabilities and equity	2,441,183	2,443,203
Guarantor Restricted Subsidiaries | Reportable Legal Entities
Current assets:
Cash and cash equivalents	(1,130)	4,454
Accounts receivable	86,658	79,689
Prepaid and other current assets	11,472	12,141
Total current assets	97,000	96,284
Properties and equipment, net	1,385,960	1,388,888
Operating lease right-of-use assets, net	2,078	2,317
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	524,564	539,705
Investment in subsidiaries	68,956	69,754
Intangible assets, net	56,211	59,300
Goodwill	342,762	342,762
Equity method investments	240,007	235,858
Deferred turnaround costs	23,363	24,154
Other assets	12,831	10,790
Total assets	2,753,732	2,769,812
Current liabilities:
Accounts payable	29,050	43,303
Accrued interest	0	0
Deferred revenue	15,316	12,087
Accrued property taxes	7,101	5,449
Current operating lease liabilities	886	968
Current finance lease liabilities	6,867	6,560
Other current liabilities	2,054	1,793
Total current liabilities	61,274	70,160
Long-term debt	0	0
Noncurrent operating lease liabilities	1,563	1,720
Noncurrent finance lease liabilities	149,828	150,935
Other long-term liabilities	29,517	29,111
Deferred revenue	21,963	24,613
Class B unit	61,531	60,507
Equity - partners	2,428,056	2,432,767
Equity - noncontrolling interests	0	0
Total liabilities and equity	2,753,732	2,769,813
Non-Guarantor Non-Restricted Subsidiaries | Reportable Legal Entities
Current assets:
Cash and cash equivalents	990	2,147
Accounts receivable	1,414	1,453
Prepaid and other current assets	370	356
Total current assets	2,774	3,956
Properties and equipment, net	0	0
Operating lease right-of-use assets, net	0	0
Net investment in leases (Cushing Connect VIEs: $101,954 and $101,871, respectively)	101,954	101,871
Investment in subsidiaries	0	0
Intangible assets, net	0	0
Goodwill	0	0
Equity method investments	34,135	34,746
Deferred turnaround costs	0	0
Other assets	0	0
Total assets	138,863	140,573
Current liabilities:
Accounts payable	396	545
Accrued interest	0	0
Deferred revenue	0	0
Accrued property taxes	0	0
Current operating lease liabilities	0	0
Current finance lease liabilities	0	0
Other current liabilities	555	520
Total current liabilities	951	1,065
Long-term debt	0	0
Noncurrent operating lease liabilities	0	0
Noncurrent finance lease liabilities	0	0
Other long-term liabilities	0	0
Deferred revenue	0	0
Class B unit	0	0
Equity - partners	68,956	69,754
Equity - noncontrolling interests	68,956	69,754
Total liabilities and equity	$ 138,863	$ 140,573

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Supplemental Guarantor / Non-Guarantor Financial Information - Condensed Consolidating Statement Of Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues:
Revenues:	$ 143,294	$ 120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	52,142	42,625
Depreciation and amortization	24,663	22,187
General and administrative	4,635	4,312
Total operating costs and expenses	81,440	69,124
Operating income	61,854	51,074
Equity in earnings of subsidiaries	0	0
Equity in earnings of equity method investments	3,882	3,626
Interest expense	(25,978)	(13,639)
Interest income	20,400	12,647
Gain on sale of assets and other	173	101
Total other income (expense)	(1,523)	2,735
Income before income taxes	60,331	53,809
State income tax expense	(34)	(31)
Net income	60,297	53,778
Allocation of net income attributable to noncontrolling interests	(2,775)	(4,219)
Net income attributable to the partners	57,522	49,559
Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	0	0
Depreciation and amortization	0	0
General and administrative	1,482	1,088
Total operating costs and expenses	1,482	1,088
Operating income	(1,482)	(1,088)
Equity in earnings of subsidiaries	84,028	63,327
Equity in earnings of equity method investments	0	0
Interest expense	(25,024)	(12,680)
Interest income	0	0
Gain on sale of assets and other	0	0
Total other income (expense)	59,004	50,647
Income before income taxes	57,522	49,559
State income tax expense	0	0
Net income	57,522	49,559
Allocation of net income attributable to noncontrolling interests	0	0
Net income attributable to the partners	57,522	49,559
Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	143,294	120,198
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	50,822	41,934
Depreciation and amortization	24,663	22,187
General and administrative	3,153	3,224
Total operating costs and expenses	78,638	67,345
Operating income	64,656	52,853
Equity in earnings of subsidiaries	1,752	2,171
Equity in earnings of equity method investments	3,173	2,720
Interest expense	(5,069)	(5,086)
Interest income	20,400	12,647
Gain on sale of assets and other	173	101
Total other income (expense)	20,429	12,553
Income before income taxes	85,085	65,406
State income tax expense	(34)	(31)
Net income	85,051	65,375
Allocation of net income attributable to noncontrolling interests	(1,023)	(2,048)
Net income attributable to the partners	84,028	63,327
Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	1,320	691
Depreciation and amortization	0	0
General and administrative	0	0
Total operating costs and expenses	1,320	691
Operating income	(1,320)	(691)
Equity in earnings of subsidiaries	0	0
Equity in earnings of equity method investments	709	906
Interest expense	0	0
Interest income	4,115	4,127
Gain on sale of assets and other	0	0
Total other income (expense)	4,824	5,033
Income before income taxes	3,504	4,342
State income tax expense	0	0
Net income	3,504	4,342
Allocation of net income attributable to noncontrolling interests	(1,752)	(2,171)
Net income attributable to the partners	1,752	2,171
Eliminations
Revenues:
Revenues:	0	0
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	0	0
Depreciation and amortization	0	0
General and administrative	0	0
Total operating costs and expenses	0	0
Operating income	0	0
Equity in earnings of subsidiaries	(85,780)	(65,498)
Equity in earnings of equity method investments	0	0
Interest expense	4,115	4,127
Interest income	(4,115)	(4,127)
Gain on sale of assets and other	0	0
Total other income (expense)	(85,780)	(65,498)
Income before income taxes	(85,780)	(65,498)
State income tax expense	0	0
Net income	(85,780)	(65,498)
Allocation of net income attributable to noncontrolling interests	0	0
Net income attributable to the partners	(85,780)	(65,498)
Affiliates
Revenues:
Revenues:	116,878	92,254
Affiliates | Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0
Affiliates | Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	116,878	92,254
Affiliates | Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0
Affiliates | Eliminations
Revenues:
Revenues:	0	0
Third parties
Revenues:
Revenues:	26,416	27,944
Third parties | Reportable Legal Entities | Parent
Revenues:
Revenues:	0	0
Third parties | Reportable Legal Entities | Guarantor Restricted Subsidiaries
Revenues:
Revenues:	26,416	27,944
Third parties | Reportable Legal Entities | Non-Guarantor Non-Restricted Subsidiaries
Revenues:
Revenues:	0	0
Third parties | Eliminations
Revenues:
Revenues:	$ 0	$ 0

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Osage Pipeline (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Mar. 31, 2023
Unusual or Infrequent Item, or Both [Line Items]
Reduction of equity in earnings of equity method investments	$ (3,882)	$ (3,626)
Osage
Unusual or Infrequent Item, or Both [Line Items]
Equity method investment, ownership percentage	50.00%		50.00%
Osage | Crude Oil Release Environmental Remediation And Recovery
Unusual or Infrequent Item, or Both [Line Items]
Reduction of equity in earnings of equity method investments	$ 900		$ 18,500
Insurance proceeds received			3,000
Remaining insurance coverage			$ 10,000

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Subsequent Event (Details) - Subsequent Event - HF Sinclair	May 03, 2023 $ / shares
Subsequent Event [Line Items]
Par value of common stock exchanged (in USD per share)	$ 0.01
Fixed exchange ratio	0.3714